The aerobic nitrogen fixing xylanolytic bacterium Paenibacillus pabuli strain ATSKP produces loosely attached capsular polysaccharide KP-EPS. On 0.5% birchwood xylan 70 ± 5.02 mg of KP-EPS was produced per gram dry weight of cells by the fourth day of growth in the absence of combined nitrogen source at 30°C. It was separated and purified using centrifugation, cold acetone precipitation and dialysis and is a sulfate containing heteropolymer as revealed by FT-IR spectrometry and elemental analysis. CHN analysis revealed the presence of 37.50% carbon, 5.90% hydrogen and 8.28% nitrogen in KP-EPS. Absence of phosphorus was confirmed by 31P NMR. ICP-OES analysis showed the presence of various metals in small concentrations. Specific binding with aniline blue suggested the presence of (1,3)-β-d-glucan. Thermal gravimetric analysis and differential scanning calorimetric analysis confirmed its thermal stability as high as 200°C. The EPS was not pseudo plastic and the viscosity was less than xanthan. The intrinsic viscosity did not reduce drastically when dissolved in 0.1 M NaCl. © 2009 Springer Science+Business Media B.V.