The fungus, Colletotrichum gloeosporioides, which is pathogenic to peppers produced an extracellular polysaccharide in liquid culture which possessed clay-dispersing activity. The polysaccharide could bind cationic dyes, Ruthenium Red and Alcian Blue, indicating it to be polyanionic. The polysaccharide dispersed kaolin in water and the dispersion was maintained for more than 7 days at 25 degreesC. Kaolin dispersion by the polysaccharide was stable from pH 3 to 10 but the addition of divalent metals at 1 mM inhibited half of the dispersion activity comparing to the control. The polysaccharide could disperse bentonite, calcium carbonate and other fine particles but did not possess emulsifying activity.