In this study, colloidal, electrorheological, and viscoelastic properties of conducting polypyrrole, biodegradable chitosan, and polypyrrole-graft-chitosan copolymer were investigated. Some physical properties such as particle size, apparent density, conductivity, magnetic susceptibility, and elemental analysis of the materials were determined. Electrokinetic properties of the materials were investigated by means of zeta ()-potential measurements in aqueous and non-aqueous (silicone oil) media. The effects of time, pH, various electrolytes, surfactants, and temperature onto -potentials of the dispersions prepared in aqueous media were examined. It was concluded that the positive -potential of polypyrrole shifted to more positive regions, and the isoelectric point of the polypyrrole concomitantly shifted to higher pH values after interaction with polycationic chitosan matrix. Polypyrrole-graft-chitosan/silicone oil suspensions were observed to be electrorheological active when subjected to external electric field strength. Creep and creep-recovery tests were applied to the suspensions and a relationship was established between viscoelastic response and -potential of the materials. Furthermore, polypyrrole-graft-chitosan-based smart electrorheological fluid was observed to behave as a viscoelastic material and exhibited a reversible nonlinear viscoelastic deformation under externally applied electric field strength.