The modern koala is the only extant member of Phascolarctidae, a family that once included several genera and species. During the Oligocene and Miocene, koalas lived in rainforests and had less specialised diets. Some species, such as the Riversleigh rainforest koala (Nimiokoala greystanesi) and some species of Perikoala, were around the same size as the modern koala, while others, such as species of Litokoala, were one-half to two-thirds its size. Like the modern species, prehistoric koalas had well developed ear structures, which suggests that long-distance vocalising developed early. During the Miocene, the Australian continent began drying out, leading to the decline of rainforests and the spread of open Eucalyptus woodlands. The genus Phascolarctos split from Litokoala in the late Miocene and had several adaptations that allowed it to live on a specialised eucalyptus diet: a shifting of the palate towards the front of the skull; larger molars and premolars; smaller pterygoid fossa; and a larger gap between the molar and the incisor teeth.

During the Pliocene and Pleistocene, when Australia experienced changes in climate and vegetation, koala species grew larger. Phascolarctos cinereus may have emerged as a dwarf form of the giant koala (P. stirtoni). The reduction in the size of large mammals has been seen as a common phenomenon worldwide during the late Pleistocene, and it is traditionally believed that several Australian mammals, such as the agile wallaby, resulted from this dwarfing. A 2008 study questions this hypothesis, noting that P. cinereus and P. stirtoni were sympatric during the middle to late Pleistocene, and possibly as early as the Pliocene. The fossil record of the modern koala extends back at least to the middle Pleistocene.

Traditionally, three different subspecies have been recognised: the Queensland koala (P. cinereus adustus), the New South Wales koala (P. c. cinereus) and the Victorian koala (P. c. victor). These forms are distinguished by pelage colour and thickness, body size and skull shape. The Queensland koala is the smallest of the three, with shorter, silver fur and a shorter skull. The Victorian koala is the largest, with shaggier, brown fur and a wider skull. The boundaries of these variations are based on state borders, and their status as subspecies are disputed. A 1999 genetic study suggests that the variations represent differentiated populations with limited gene flow between them, and that the three subspecies comprise a single evolutionarily significant unit. Other studies have found that koala populations have high levels of inbreeding and low genetic variation. Such low genetic diversity may have been a characteristic of koala populations since the late Pleistocene. In April 2013, scientists from the Queensland University of Technology announced they had fully sequenced the koala genome.

The koala is a stocky animal with a large head and vestigial or non-existent tail. It has a body length of 60-85cm and a weight of 4-15kg, making it among the largest arboreal marsupial. Koalas from Victoria are twice as heavy as those from Queensland. The species is sexually dimorphic, with males 50% larger than females. Males are further distinguished from females by their more curved noses and the presence of chest glands, which are visible as hairless patches. As in most marsupials, the male koala has a bifurcated penis, and the female has two lateral vaginas and two separate uteri. The male's penile sheath contains naturally occurring bacteria that play an important role in fertilisation. The female's pouch opening is tightened by a sphincter that keeps the young from falling out.

The pelage of the koala is thicker and longer on the back, and shorter on the belly. The ears have thick fur on both the inside and outside. The back fur colour varies from light grey to chocolate brown. The belly fur is whitish; on the rump it is dappled whitish, and darker at the back. The koala has the most effective insulating back fur of any marsupial and is highly resilient to wind and rain, while the belly fur can reflect solar radiation. The koala's curved, sharp claws are well adapted for climbing trees. The large forepaws have two opposable digits (the first and second, which are opposable to the other three) that allow them to grasp small branches. On the hindpaws, the second and third digits are fused, a typical condition for members of Diprotodontia, and the attached claws (which are still separate) are used for grooming. As in humans and other primates, koalas have friction ridges on their paws. The animal has a sturdy skeleton and a short, muscular upper body with proportionately long upper limbs that contribute to its climbing and grasping abilities. Additional climbing strength is achieved with thigh muscles that attach to the shinbone lower than other animals. The koala has a cartilaginous pad at the end of the spine that may make it more comfortable when it perches in the fork of a tree.

The koala has one of the smallest brains in proportion to body weight of any mammal, being 60% smaller than that of a typical diprotodont. The brain's surface is fairly smooth, typical for a "primitive" animal. It occupies only 61% of the cranial cavity and is pressed against the inside surface by cerebrospinal fluid. The function of this relatively large amount of fluid is not known, although one possibility is that it acts as a shock absorber, cushioning the brain if the animal falls from a tree. The koala's small brain size may be an adaptation to the energy restrictions imposed by its diet, which is insufficient to sustain a larger brain. Because of its small brain, the koala has a limited ability to perform complex, unfamiliar behaviours. For example, when presented with plucked leaves on a flat surface, the animal cannot adapt to the change in its normal feeding routine and will not eat the leaves. The koala's olfactory senses are normal, and it is known to sniff the oils of individual branchlets to assess their edibility. Its nose is fairly large and covered in leathery skin. Its round ears provide it with good hearing and it has a well-developed middle ear. A koala's vision is not well developed, and its relatively small eyes are unusual among marsupials in that the pupils have vertical slits. Koalas make use of a novel vocal organ to produce low-pitched sounds. Unlike typical mammalian vocal cords, which are folds in the larynx, these organs are placed in the velum (soft palate) and are called velar vocal cords.

The koala has several adaptations for its eucalypt diet, which is of low nutritive value, of high toxicity and high in dietary fibre. The animal's dentition consists of the incisors and cheek teeth (a single premolar and four molars on each jaw), which are separated by a large gap (a characteristic feature of herbivorous mammals). The incisors are used for grasping leaves, which are then passed to the premolars to be snipped at the petiole before being passed to the highly cusped molars, where they are shredded into small pieces. Koalas may also store food in their cheek pouches before it is ready to be chewed. The partially worn molars of middle-aged koalas are optimal for breaking the leaves into small particles, resulting in more efficient stomach digestion and nutrient absorption in the small intestine, which digests the eucalyptus leaves to provide most of the animal's energy. A koala sometimes regurgitates the food into the mouth to be chewed a second time.

Unlike kangaroos and eucalyptus-eating possums, koalas are hindgut fermenters, and their digestive retention can last for up to 100 hours in the wild, or up to 200 hours in captivity. This is made possible by the extraordinary length of their caecum—200cm long and 10cm in diameter—the largest proportionally of any animal. Koalas can select which food particles to retain for longer fermentation and which to pass through. Large particles typically pass through more quickly, as they would take more time to digest. While the hindgut is proportionally larger in the koala than in other herbivores, only 10% of the animal's energy is obtained from fermentation. Since the koala gains a low amount of energy from its diet, its metabolic rate is half that of a typical mammal, although this can vary between seasons and sexes. The koala conserves water by passing relatively dry faecal pellets high in undigested fibre, and by storing water in the caecum.

Koalas are herbivorous, and while most of their diet consists of eucalypt leaves, they can be found in trees of other genera, such as Acacia, Allocasuarina, Callitris, Leptospermum and Melaleuca. Although the foliage of over 600 species of Eucalyptus is available, the koala shows a strong preference for around 30. They tend to choose species that have a high protein content and low proportions of fibre and lignin. The most favoured species are Eucalyptus microcorys, E. tereticornis, and E. camaldulensis, which, on average, make up more than 20 per cent of their diet. To most animals, eucalyptus leaves are incredibly poisonous, but the koala's digestive system has evolved to manage the toxins. Since eucalypt leaves have a high water content, the koala does not need to drink often; its daily water turnover rate ranges from 71-91mm per kilogram of body weight. Although females can meet their water requirements from eating leaves, larger males require additional water found on the ground or in tree hollows. When feeding, a koala holds onto a branch with hindpaws and one forepaw while the other forepaw grasps foliage. Small koalas can move close to the end of a branch, but larger ones stay near the thicker bases. Koalas consume up to 400g of leaves a day, spread over four to six feeding sessions. Despite their adaptations to a low-energy lifestyle, they have meagre fat reserves and need to feed often.

Because they get so little energy from their diet, koalas must limit their energy use and sleep 20 hours a day; only 4 minutes a day are spent in active movement. They are predominantly active at night and spend most of their waking hours feeding. They typically eat and sleep in the same tree, possibly for as long as a day. On warm days, a koala may rest with its back against a branch or lie on its stomach or back with its limbs dangling. During cold, wet periods, it curls itself into a tight ball to conserve energy. On windy days, a koala will find a lower, thicker branch to rest on. While it spends most of the time in the tree, the animal will descend to the ground to move to another tree, walking on all fours. The koala usually grooms itself with its hind paws, but sometimes uses its forepaws or mouth.

Koalas are asocial animals and spend just 15 minutes a day on social behaviours. In Victoria, home ranges are small and have extensive overlap, while in central Queensland they are larger and overlap less. Koala society appears to consist of "residents" and "transients", the former being mostly adult females and the latter males. Resident males appear to be territorial and dominate others with their larger body size. Alpha males tend to establish their territories close to breeding females, while younger males are subordinate until they mature and reach full size. Adult males occasionally venture outside their home ranges; when they do so, dominant ones retain their status. When a male enters a new tree, he marks it by rubbing his chest gland against the trunk or a branch; males have occasionally been observed to dribble urine on the trunk. This scent-marking behaviour probably serves as communication, and individuals are known to sniff the base of a tree before climbing. Scent marking is common during aggressive encounters. Chest gland secretions are complex chemical mixtures—about 40 compounds were identified in one analysis—that vary in composition and concentration with the season and the age of the individual.

Adult males communicate with loud bellows—low pitched sounds that consist of snore-like inhalations and resonant exhalations that sound like growls. It has been hypothesized that these sounds are generated by unique vocal organs found in koalas. Because of their low frequency, these bellows can travel far through air and vegetation. Koalas may bellow at any time of the year, particularly during the breeding season, when it serves to attract females and possibly intimidate other males. They also bellow to advertise their presence to their neighbours when they enter a new tree. These sounds signal the male's actual body size as well as exaggerate it; females pay more attention to bellows that originate from larger males. Female koalas bellow, though more softly, in addition to making snarls, wails and screams. These calls are produced when in distress and when making defensive threats. Young koalas squeak when in distress. As they get older, the squeak develops into a "squawk" that is produced both when in distress and to show aggression. When another individual climbs over it, a koala makes a low grunt with its mouth closed. Koalas make numerous facial expressions. When snarling, wailing or squawking, the animal curls the upper lip and points its ears forward. During screams, the lips retract and the ears are drawn back. Females bring the lips forward and raise their ears when agitated.

Agonistic behaviour typically consists of squabbles between individuals climbing over or passing each other. This occasionally involves biting. Males who are strangers may wrestle, chase and bite each other. In extreme situations, a male may try to displace a smaller rival from a tree. This involves the larger aggressor climbing up and attempting to corner the victim, who tries either to rush past him and climb down or to move to the end of a branch. The aggressor attacks by grasping the target by the shoulders and repeatedly biting him. Once the weaker individual is driven away, the victor bellows and marks the tree. Pregnant and lactating females are particularly aggressive and will attack individuals that come too close. In general, however, koalas tend to avoid energy-wasting aggressive behaviour.

Koalas are seasonal breeders, and births take place from October to May. Females in oestrus tend to hold their head further back than usual and commonly display tremors and spasms. However, males do not appear to recognise these signs, and have been observed to mount non-oestrous females. Because of his much larger size, a male can usually force himself on a female, mounting her from behind, and in extreme cases the male may pull the female out of the tree. A female may scream and vigorously fight off her suitors, but will submit to one who is dominant, or who is more familiar. The bellows and screams that accompany matings can attract other males to the scene, obliging the incumbent to delay mating and fight the intruders off. These fights may allow the female to assess who is dominant. Older males usually have accumulated scratches, scars and cuts on the exposed parts of their noses and on their eyelids.

The koala has a gestation period lasting 30-35 days, and gives birth to a single young (although twins occur on occasion). As with all marsupials, the young or joey is born while at the embryonic stage, weighing only 0.5g. However, it has relatively well-developed lips, forelimbs and shoulders, as well as functioning respiratory, digestive and urinary systems. The joey crawls into its mother's pouch to continue the rest of its development. Unlike most other marsupials, the koala does not clean her pouch.

A female koala has two teats; the joey attaches itself to one of them and suckles for the rest of its pouch life. The koala has one of the lowest milk energy production rates in relation to body size of any mammal. The female makes up for this by lactating for as long as 12 months. At seven weeks of age, the joey's head grows longer and becomes proportionally large, pigmentation begins to develop, and its sex can be determined (the scrotum appears in males and the pouch begins to develop in females). At 13 weeks, the joey weighs around 50g and its head has doubled in size. The eyes begin to open and fine fur grows on the forehead, nape, shoulders and arms. At 26 weeks, the fully furred animal resembles an adult, and begins to poke its head out of the pouch.

As the young koala approaches six months, the mother begins to prepare it for its eucalyptus diet by pre-digesting the leaves, producing a faecal pap that the joey eats from her cloacum. The pap is quite different in composition than regular faeces, resembling instead the contents of the caecum, which has a high concentration of bacteria. Eaten for about a month, the pap provides a supplementary source of protein at a transition time from a milk to a leaf diet. The joey fully emerges from the pouch for the first time at six or seven months of age, when it weighs 300-500g. It explores its new surroundings cautiously, clinging to its mother for support. By nine months, it weighs over 1kg and develops its adult fur colour. Having permanently left the pouch, it rides on its mother's back for transportation, learning to climb by grasping branches. Gradually, it spends more time away from its mother and at 12 months it is fully weaned, weighing around 2.5kg. When the mother becomes pregnant again, her bond with her previous offspring is permanently severed. Newly weaned young are encouraged to disperse by their mother's aggressive behaviour towards them.

Females become sexually mature at about three years of age and can then become pregnant; in comparison, males reach sexual maturity when they are about four years old, although they can produce sperm as early as two years. While the chest glands can be functional as early as 18 months of age, males do not begin scent-marking behaviours until they reach sexual maturity. Because the offspring have a long dependent period, female koalas usually breed in alternate years. Favourable environmental factors, such as a plentiful supply of high-quality food trees, allow them to reproduce every year.

Koalas may live from 13 to 18 years in the wild. While female koalas usually live this long, males may die sooner because of their more hazardous life. Koalas usually survive falls from trees and immediately climb back up, but injuries and deaths from falls do occur, particularly in inexperienced young and fighting males. At around six years of age, the koala's chewing teeth begin to wear down and their chewing efficiency decreases. Eventually, the cusps will disappear completely and the animal will die of starvation.

Koalas have few predators; dingos and large pythons may prey on them, while birds of prey (such as powerful owls and wedge-tailed eagles) are threats to young. They are generally not subject to external ticks in coastal areas. Koalas may also suffer mange from the mite Sarcoptes scabiei, and skin ulcers from the bacterium Mycobacterium ulcerans, but neither are common. Internal parasites are few and largely harmless. These include the tapeworm Bertiella obesa, commonly found in the intestine, and the nematodes Marsupostrongylus longilarvatus\ and Durikainema phascolarcti, which are infrequently found in the lungs. In a three-year study of almost 600 koalas admitted to the Australian Zoo Wildlife Hospital in Queensland, 73.8% of the animals were infected with at least one species of the parasitic protozoal genus Trypanosoma, the most common of which was T. irwini.

Koalas can be subject to pathogens like Chlamydiaceae bacteria,which can cause keratoconjunctivitis, urinary tract infection and reproductive tract infection. Such infections are widespread on the mainland but absent in some island populations. The koala retrovirus (KoRV) may cause Koala Immune Deficiency Syndrome (KIDS), which is similar to AIDS in humans. Prevalence of KoRV in koala populations suggests a trend spreading from the north to the south of Australia. Northern populations are completely infected, while some southern populations (including Kangaroo Island) are free.

When a koala dies, a new occupant won't move into its home range for about a year—the time it takes for scratches on the trees and scent markings to disappear. Then, as long as they are not disturbed, koalas keep their home ranges (a group of several trees that they regularly visit) throughout their lives—up to 18 years.

The animals are vulnerable to bushfires due to their slow movements and the flammability of eucalypt trees. The koala instinctively seeks refuge in the higher branches, where it is vulnerable to intense heat and flames. Bushfires also fragment the animal's habitat, which restricts their movement and leads to population decline and loss of genetic diversity. Dehydration and overheating can also prove fatal. Consequently, the koala is vulnerable to the effects of climate change. Another predicted negative outcome of climate change is the effect of elevations in atmospheric CO2 levels on the koala's food supply: increases in CO2 cause Eucalyptus trees to reduce protein and increase tannin concentrations in their leaves, reducing the quality of the food source.

The koala is featured in the Dreamtime stories and mythology of indigenous Australians. The Thurrawal people believed that the animal helped row the boat that brought them to the continent. Another myth tells of how a tribe killed a koala and used its long intestines to create a bridge for people from other parts of the world. This narrative highlights the koala's status as a game animal and the length of its intestines. Several stories tell of how the koala lost its tail. In one, a kangaroo cuts it off to punish the koala for being lazy and greedy. Tribes in both Queensland and Victoria regarded the koala as a wise animal and sought its advice. Bidjara-speaking people credited the koala for turning barren lands into lush forests. The animal is also depicted in rock carvings, though not as much as some other species.

The first recorded encounter between a European and a koala was in 1798, and an image of the animal was published in 1810 by naturalist George Perry. Botanist Robert Brown wrote the first detailed scientific description of the koala in 1814, although his work remained unpublished for 180 years. Popular artist John Gould illustrated and described the koala, introducing the species to the general British public. Further details about the animal's biology were revealed in the 19th century by several English scientists.

The first description published in England 200 years ago introduced the koala as the "New Holland Sloth". In his Arcana; or The Museum of Natural History (1881), the naturalist George Perry was severely censorious of the koala's "sluggishness and inactivity", and thought its "clumsy appearance" was "void of elegance".

The koala's installation in national favour owes much to eager exercises in anthropomorphism in the early 20th century, It is featured in Ethel Pedley's 1899 book Dot and the Kangaroo, in which it is portrayed as the "funny native bear". Artist Norman Lindsay depicted a more anthropomorphic koala in The Bulletin cartoons, starting in 1904. This character also appeared as Bunyip Bluegum in Lindsay's 1918 book The Magic Pudding. Perhaps the most famous fictional koala is Blinky Bill. Created by Dorothy Wall in 1933, the character appeared in several books and has been the subject of films, TV series, merchandise and a 1986 environmental song by John Williamson. The first Australian stamp featuring a koala was issued by the Commonwealth in 1930.

It was in Queensland that the koala was the subject of Australia's first concerted environmental campaign after the state Labor government, in response to pressure from trappers who had denuded koala populations to the south, proclaimed an open season on the animal in August 1927. Resistance orchestrated by the Queensland Naturalists Club and the Nature Lovers' League inspired one newspaper to print an edition bordered in black, and flushed out celebrity apologists, including the writer Vance Palmer. The trappers had their way, slaughtering and skinning no fewer than a million koalas. Australia's first three fauna parks, set up in the late 1920s, were then dedicated to koalas.

Koalas are listed as of Least Concern by the International Union for Conservation of Nature. The Australian government lists populations in Queensland and New South Wales as Vulnerable. The animal was hunted heavily in the early 20th century for its fur, and large-scale cullings in Queensland resulted in a public outcry that initiated a movement to protect the species. Sanctuaries were established, and translocation efforts moved koalas whose habitat had become fragmented or reduced to new regions. The biggest threat to their existence is habitat destruction due to agriculture and urbanisation.