Azotobacter chroococcum MAL-201, when grown under nitrogen-free conditions with excess glucose, accumulated poly-beta-hydroxybutyric acid amounting to 75% of cell dry weight at the late exponential phase. This led to induction of encystment, which increased steadily with concomitant intracellular degradation of the polymer, Increase in encystment and PHB production were parallel up to 0.5% (wt/vol) glucose. Further increase in glucose reduced cyst formation but enhanced PHB accumulation. Replacement of glucose by n-butyl alcohol and metabolically related compounds identified crotonate as the best encystment inducer followed by beta-hydroxybutyrate and butyrate, but PHB production was inhibited in general, Supplementation of medium with these compounds enhanced the onset of encystment, and only beta-hydroxybutyrate increased PHB accumulation significantly.