In this study, phase separation of colloidal whey protein isolate (WPI) particle dispersions was studied using a rod-like polysaccharide xanthan. Effects of different xanthan concentration, particle volume fraction, and temperature were analyzed by visual observations, turbidity measurements, and particle mobility tracking method. Particle mobility was determined using a diffusing wave spectroscopy (DWS) set up. Xanthan concentration was kept low in order not to increase the viscosity of dispersions, so that the phase separation could be observed easily. Visual observations showed that there was a minimum concentration of xanthan to induce phase separation at a constant particle volume fraction, and xanthan concentration was found to have an important effect on the degree of phase separation. The temperature was also found to have an effect on depletion mechanism. Phase separation was mainly a result of different sizes of WPI particles, and xanthan induced the depletion interaction between WPI particles, as supported by the data obtained from DWS. The results of this study explained both the mechanism and the stability range of particle dispersions in the presence of xanthan, which is important for the design of stable systems, including colloidal particles.