The antifungal activity of chitosan on a common fungal phytopathogen, Sclerotinia sclerotiorum, and the control effect on sclerotinia rot of carrot were investigated. Mycelial growth and fungal biomass were strongly inhibited by chitosan. Using propidium iodide stain combined with fluorescent microscopy, the plasma membrane of chitosan-treated S. sclerotiorum mycelia was observed to be markedly damaged. Concomitantly, protein leakage and lipid peroxidation was also found to be significantly higher in chitosan-treated mycelia compared to the control. Chitosan provided an effective control of sclerotinia rot of carrot, with induction of activity of defense-related enzymes including polyphenoloxidase and peroxidase. These data suggest that the effects of chitosan on sclerotinia rot of carrot may be associated with the direct damage to the plasma membrane and lipid peroxidation of S. sclerotiorum, and the elicitation of defense response in carrot.