The present paper deals with the problem of a classical predator–prey system with infection of prey population. A classical predator–prey system is split into three groups, namely susceptible prey, infected prey and predator. The relative removal rate of the susceptible prey due to infection is worked out. We observe the dynamical behaviour of this system around each of the equilibria and point out the exchange of stability. It is shown that local asymptotic stability of the system around the positive interior equilibrium ensures its global asymptotic stability. We prove that there is always a Hopf bifurcation for increasing transmission rate. To substantiate the analytical findings, numerical experiments have been carried out for hypothetical set of parameter values. Our analysis shows that there is a threshold level of infection below which all the three species will persist and above which the disease will be epidemic. Copyright © 2003 John Wiley & Sons, Ltd.