An effective two‐stage method has been developed for imparting antimicrobial properties to regular polyethylene terephthalate (R‐PET), polyethylene glycol modified polyethylene terephthalate (PEG‐M‐PET), R‐PET/Cotton blend (R‐PET/C) and PEG‐M‐PET/Cotton blend (PEG‐M‐PET/C) fabrics. The method consists of partial hydrolysis of the fabrics to create carboxylic groups in PET macromolecules followed by subsequent reaction with dimethylalkylbenzyl ammonium chloride (DMABAC) under alkaline conditions. The reaction conditions such as pH, reaction temperature and time, carboxylic content, and DMABAC concentration were studied. Characterization of the finished fabrics was carried out through scanning electron microscopy (SEM) and Fourier transform infrared spectra (FTIR). All the modified PET fabrics showed excellent antibacterial activity towards Gram‐positive (Bacillus mycoides), Gram‐negative (Escherichia coli), and nonfilamentous fungus (Candida albicans). The achieved antimicrobial functions on the PET fabrics are durable in repeated laundering processes. Even after laundering 10 times the fabrics could still provide more than 85% of its antimicrobial activity against B. mycoides, E. coli, and C. albicans. © 2008 Wiley Periodicals, Inc. J Appl Polym Sci, 2008