Cryptococcus neoformans strains exhibit variability in their capsular polysaccharide, cell morphology, karyotype, and virulence, but the relationship between these variables is poorly understood. A hypovirulent C. neoformans 24067A isolate, which usually produces smooth (SM) colony types, was found to undergo phenotypic switching and to produce wrinkled (WR) and pseudohyphal (PH) colony types at frequencies of approximately 10 −4 to 10 −5 when plated on Sabouraud agar. Cells from these colony types had large polysaccharide capsules and PH morphology, respectively. Scanning electron microscopy showed that different colony types were the result of altered cellular packing in the colony. Phenotypic switching was associated with quantitative and qualitative changes in capsular polysaccharide. Specifically, the glucuronoxylomannan (GXM) of the WR polysaccharide differed in the proportion of structural reporter groups and in increased xylose residue content linked at the 4 to 0 position. The relative virulence of the colony types was WR > PH > SM, as measured by CFU in rat lungs after intratracheal infection. Karyotype instability was observed in strain 24067A and involved primarily two chromosomes. Colonies with an alternative colony type exhibited more karyotype changes, which did not revert to the original karyotype in reverted colonies. In summary, this study revealed that phenotypic switching in C. neoformans (i) can produce WR colonies consisting of cells with either large capsule or PH morphology, (ii) is associated with production of structurally different GXM, (iii) is commonly associated with karyotype changes, (iv) can produce cells of PH morphology, and (v) can increase the virulence of a strain. Hence, phenotypic switching is an adaptive mechanism linked to virulence that can generate cell types with very different biological characteristics.