Two common forms are found, when hydrated the clay exhibits a 1 nm spacing of the layers and when dehydrated (meta-halloysite) the spacing is 0.7 nm. Halloysite naturally occurs as small cylinders which average 30 nm in diameter with lengths between 0.5 and 10 micrometres. The cation exchange capacity depends on the amount of hydration, as 2H2O has 5-10 m.e/100g, while 4H2O has 40-50 m.e./100g. "Endellite" is the alternative name for the 4H2O structure.
The formation of halloysite is due to hydrothermal alteration, and it is often found near carbonate rocks. For example, halloysite samples found in Wagon Wheel Gap, Colorado, United States are suspected to be the weathering product of rhyolite by downward moving waters. In general the formation of clay minerals is highly favoured in tropical and sub-tropical climates due to the immense amounts of water flow. Halloysite has also been found overlaying basaltic rock, showing no gradual changes from rock to mineral formation. Halloysite occurs primarily in recently-exposed volcanic-derived soils, but it also forms from primary minerals in tropical soils or pre-glacially weathered materials. Igneous rocks, especially glassy basaltic rocks are more susceptible to weathering and alteration forming halloysite.
Often as is the case with halloysite found in Juab County, Utah, United States the clay is found in close association with goethite and limonite and often interspersed with alunite. Feldspars are also subject to decomposition by water saturated with carbon dioxide. When feldspar occurs near the surface of lava flows, the CO2 concentration is high, and reaction rates are rapid. With increasing depth, the leaching solutions become saturated with silica, aluminium, sodium, and calcium. Once the solutions are depleted of CO2 they precipitate as secondary minerals. The decomposition is dependent on the flow of water. In the case that halloysite is formed from plagioclase it will not pass through intermediate stages.
A very pure halloysite is mined from a highly altered rhyolite occurrence in New Zealand uses include porcelain and bone china.
Halloysite also has been used as a petroleum cracking catalyst in the past. Exxon has also developed a cracking catalyst based on synthetic halloysite.
Due to its structure, it can be used as filler in either natural or modified forms in nanocomposites.