In many semiarid areas of China, potato production is often limited by poor soil fertility and low fertilizer use efficiency, but topdressing to deeper soil layers in the late growing period is difficult. With the aim of improving fertilizer use efficiency and minimizing negative impacts on the environment, a new palygorskite-coated slow-release fertilizer was prepared. According to the nutrient requirements of potato in its three main growth stages, the product consisted of three parts of chemical fertilizers with each part coated by palygorskite. A two-year study was undertaken to investigate the controlled release behavior of the product, and its impact on potato yield and fertilizer uptake was also evaluated. Two coating ratios (20 and 30%) of palygorskite-coated vs. palygorskite-mixed chemical fertilizer and chemical fertilizers only were applied with three rates (allkgha-1): (1) low (94.5 N and 4.5 P), (2) medium (137.9 N, 16.5 P and 10.5 K), and (3) high (223.4 N, 24.0 P and 81.0 K). The results both from soil (mineral N and available P) and crop (leaf nitrate N) indicated a controlled release characteristic of palygorskite-coated fertilizer which synchronized better with nutrient demands of potato plants. The palygorskite-coated fertilizer treatment resulted in the highest total tuber yield, 14.6-20.3% higher than the control. Partial factor productivity of N, P and K fertilizer was also significantly increased by palygorskite-coated fertilizer. The palygorskite-coated fertilizer could be promising for potato production and be beneficial to agricultural sustainability in semiarid areas. © 2014 Elsevier B.V.