The deformation of a viscoelastic drop suspended in a homogeneous viscoelastic matrix is investigated. The drop and the matrix fluids are assumed to obey linear viscoelastic constitutive equations. Small-deformation analysis is carried out on the basis of the general solution for creeping flow around a spherical drop. The corresponding stress is calculated by extending Batchelor's approach to viscoelastic media for both small and large deformations. Good agreement was found between the model predictions and experimental results available in the literature. (C) 2004 The Society of Rheology.