Over a 22-month period, sequential nasal and skin swabs were obtained from 52 healthy captive koalas (Phascolarctos cinereus) from the Sydney region. Cryptococcus neoformans was isolated in 17 koalas from 64 of 262 (24%) nasal swabs and from nine of 262 (3%) skin swabs. Prevalence of nasal colonization varied seasonally from 12% (3/25) to 38% (10/26). Cryptococcus neoformans var. gattii alone was cultured from 37, var. neoformans alone from 22 and both varieties from five nasal swabs. Of 33 koalas sampled on three or more occasions, organisms were isolated persistently from six, occasionally from eight and never from 19. Two koalas were persistently and heavily (>/=100 colonies/plate) colonized by C. neoformans var. gattii and two with var. neoformans. Isolation of C. neoformans var. gattii from the skin was low grade and sporadic. No koalas from which C. neoformans was persistently isolated showed clinical signs of cryptococcosis and all except one had a negative latex cryptococcal antigen test, therefore the nasal cavity was presumed to be colonized by, rather than infected with, C. neoformans. Preliminary observations of koalas from Coffs Harbour indicated a much higher prevalence of colonization by C. neoformans, suggesting that environmental factors influenced the extent of carriage by C. neoformans.