A statistical thermodynamic theory is developed to investigate the effects of solute excluded volume on the stability of globular proteins. Proteins are modeled as two states in chemical equilibrium: the denatured state is modeled as a flexible chain of tangent hard spheres (pearl‐necklace chain) while the native state is modeled as a single hard sphere. Study of model proteins bovine pancreatic trypsin inhibitor and lysozyme in a McMillan‐Mayer model solution of hard spheres indicates that the excluded volume of solutes has three distinct types of effects on protein stability: (1) small‐size solutes strongly denature proteins, (2) medium‐size solutes stabilize proteins at low solute concentrations and destabilize them at high concentrations, and (3) large‐size solutes stabilize native‐state proteins across the whole liquid region. The study also finds that increasing the chain length of hard‐chain polymer solutes has an effect on protein stability that is similar to increasing the diameter of spherical solutes. This work qualitatively explains why stabilizers tend to be large size molecules such as sugars, polymers, polynols, nonionic, and anionic surfactants while denaturants tend to be small size molecules such as alcohols, glycols, amides, formamides, ureas, and guanidium salts. Quantitative comparison between theoretical predictions and experimental results for folding free energy changes shows that the excluded‐volume effect is at least as important as the binding and/or electrostatic effects on solute‐assisted protein‐denaturation processes. Our theory may also be able to explain the effect of excluded volume on the Φ condensation of DNA. © 1996 John Wiley & Sons, Inc.