Polyaniline (PAni) was synthesized by the miniemulsion polymerization and dispersed in a poly(epichlorohydrine-co-ethylene oxide) (ECO) solution. The rheological properties using an R/S Rheometer and the shear-dependent electrical resistance using a homemade setup were measured. The addition of PAni particles to the ECO solution causes an increase in the shear stress and shear viscosity and the nature of flow changes from a dilatant to a Newtonian fluid. For both the ECO solution and ECO-PAni mixture, the viscosity at any particular shear rate is higher during the increasing cycle of shear rate compared with the decreasing cycle of shear rate called hysteresis. The ECO-PAni mixture executes a step-like viscosity transition over the shear rate region 50-150 s(-1), which is known as shear rate-induced phase transition. The resistance of ECO solution decreases with the increase in shear rate and reversibly increases with the decrease in shear rate, whereas the resistance of ECO-PAni mixture increases during both the increasing and decreasing cycles of the shear rate. The difference in resistance at zero shear rate before and after the end of shear cycle is termed as electrical set. The ECO solution and ECO-PAni mixture exhibit 4% and 79% electrical set in terms of decrease and increase of resistance, respectively. The settling process of PAni in the ECO-PAni mixture is slower compared with the pure ECO in solution. The settling time of PAni in the ECO-PAni mixture increases with the decrease in shear rate. (C) 2009 Wiley Periodicals, Inc. J Appl Polym Sci 114: 238-245, 2009