Four new Penicillium spp. isolates (NRRL 21966, NRRL 21967, NRRL 21968, and NRRL 21969) are capable of essentially quantitative conversion of native alternan to a polymeric modified form having a lower apparent molecular weight than native alternan. A fifth isolate (NRRL 30489) obtained from a survey of deposited organisms and classified as a Penicillium subgenus Biverticillium has the same ability. The modified alternan has rheological properties similar to ultrasonicated alternan and is produced without the expense of ultrasonication. It would have utility as a substitute for gum arabic for uses such as bulking agents and extenders in foods and cosmetics.