The biocontrol fungi Trichoderma harzianum, used to control soilborne plant pathogens, and Beauveria bassiana, used to control insect pests, were formulated as mycelial biomass in alginate pellets with wheat bran added. After drying for 0, 4, or 16 h, pellets were placed in water or in aqueous solutions of polyethylene glycol (PEG) 8000 for 4 to 24 h and then allowed to continue drying. PEG-treated pellets containing T. harzianum showed significantly greater proliferation of hyphae in soil than untreated pellets or pellets treated with water. Production of conidia of T. harzianum from PEG-treated pellets was lower than production from untreated pellets after 4 days, although rates were equivalent after 7 days. In contrast, production of conidia of B. bassiana was significantly more rapid from PEG-treated pellets than from untreated pellets. Biocontrol of soilborne plant pathogens or insect pests may be enhanced by rapid hyphal growth of T. harzianum in soil or rapid sporulation of B. bassiana on foliage, respectively. Therefore, PEG treatment may improve the efficacy of these biocontrol agents.