Survival of sclerotia of Macrophomina phaseolina was studied in both nonpasteurized (natural) and pasteurized very fine, sandy loam soils. The soil matric water potentials (Ψm) tested were 0, -10, -30, -100, -300, -500, and -1,500 J/Kg. An air-dried soil treatment also was included in this study (about -40,000 J/Kg). At a Ψm of 0 J/Kg, viability of sclerotia was 40 and 0% after 2 and 4 weeks of incubation at 30°C, respectively. Survival of sclerotia decreased with time in the soil samples adjusted from -10 to -1,500 J/Kg and remained about 100% viable in the air-dry soil treatment. After 20 weeks of incubation, viability of sclerotia was reduced to 10% in the Ψm treatment of -10 J/kg and was more than 50% at Ψm of -500 and -1,500 J/Kg. Survival of sclerotia followed a similar trend in the pasteurized soil. However, the rate of decrease in survival of sclerotia in the pasteurized soil (Ψm = -10, -30, -100, -300, -500, and -1,500 J/Kg) was less than that in the natural soil. The influence of water potential on colonization of bean stem tissues by M. phaseolina was studied in small constant-humidity chambers controlled with KCI solutions. Segments of bean stems inoculated with sclerotia of M. phaseolina were incubated in the chambers for 10 days at 30°C. The extent of colonization was increased as osmotic water potential (Ψs) decreased and was most severe at Ψs = -3,990 J/Kg. However, further decreases in the Ψs resulted in a decrease in the extent of colonization, which was significantly diminished at Ψs lower than -7,150 J/Kg. The number of sclerotia of M. phaseolina produced per square millimeter of colonized tissues was also increased as the Ψs in the incubation chamber was decreased from 0 to -5,330 J/Kg. Maximal number of sclerotia was produced at Ψs = -3,990 J/Kg and sclerotial production was still relatively high at Ψs = -8,080 J/Kg. These results show that M. phaseolina can survive and colonize beans under relatively dry conditions.