The study focused on the development of biofunctional polyester/cotton blend fabric using a natural product. An antimicrobial agent extracted from the seeds of Neem tree (Azadirachta indica) was used for imparting antibacterial property to the blend fabric. Resin and catalyst concentrations were optimized to get the maximum crosslinking in the fabric blends using glyoxal/glycol as a crosslinking agent. The optimized concentrations were used to treat the fabric with the antimicrobial agent along with the crosslinking agent. Quantitative analysis was carried out to measure the antimicrobial activity against Grain-positive and Gram-negative bacteria. The results showed that the treated fabrics inhibited the growth of Gram-positive bacteria (Bacilhis siibtilis) by more than 90% as compared to the control sample. Antimicrobial activity against Gram- positive bacteria was retained up to five machine washes and decreased thereafter. The antibacterial activity was higher against Gram-positive bacteria as compared to Gram- negative bacteria (Proteits vidgaris). The treated fabrics also showed improved crease recovery property although the tensile property showed a marginal decrease. (c) 2007 Wiley Periodicals, Inc.