We have investigated the effects of hydrophobic interactions on the rheological behavior and microstructure of suspension of carboxylated core-shell latex particles with changing hydrophobicity of shell polymer and suspending medium. The carboxylated core-shell latex particles formed lattice-like microstructures in aqueous suspension with dissociation of carboxyl groups. With increasing hydrophobicity of the shell polymer, the interparticle distance xi in the microstructure decreased. However, xi increased with increasing hydrophobicity of the suspending medium. The effect of hydrophobic interaction on xi was explained by the steric stabilization theory for particles with grafted polymer on the surface. As the carboxylated core-shell latex particles overlapped each other in the microstructure, an attractive force was generated between the particles in aqueous suspension. With increasing hydrophobicity of the shell, the attractive force increased, but with increasing hydrophobicity of the suspending medium, the attractive force decreased. (c) 2006 Wiley Periodicals, Inc.