The polysaccharide capsule is a characteristic virulence factor in the yeast-pathogen, Cryptococcus neoformans. Growth in hypertonic growth media results in yeast cells with visibly smaller capsules. We investigated this suppression quantitatively, using a chemical assay for cell-bound and dissolved capsular polysaccharide. Molar NaCl suppressed production of cell-bound polysaccharide by a factor of 2.5- to 5-fold. The possibility of salt-induced physico-chemical contraction of capsular gel was tested by dialysis of fixed cells from hypotonic medium against medium containing 1 M NaCl and against the original medium again, while capsular thickness, packed cell volume and cell-bound polysaccharide were followed. We detected a physical contraction of gel following dialysis against medium containing 1 M NaCl. Mutants which gave mucoid colonies on hypertonic agar were isolated. One of these gave twice as much polysaccharide as the wild type when cultivated in medium containing 1 M NaCl. The hypercapsular trait was passed through serial outcrosses to the wild type and segregated as a chromosomal gene. This mutant may represent a gene which regulates production of capsular polysaccharide.