Abstract: An improved process for preparing an aqueous clay slurry having superior gellation properties. The process involves the bead milling of the clay in an aqueous medium for a period of about 0.5 to 20 minutes at an energy input level of about 44 to 146 kilowatt-hours per metric ton of dry clay. The milling may carried out using any suitable horizontal or vertical sand mill or ball mill such as the "Morehouse Cowles Sandmill" or the "Polymill" containing a grinding medium such as zirconium silicate or zirconium oxide. The clay is preferably a smectite clay such as montmorillonite and is present in the slurry in the range of about 3 to 30 wt. %, based on the total weight of the slurry. The aqueous clay slurry is useful as a rheological additive in water-based coating formulations.