Cryptococcus neoformans is a common environmental yeast and opportunistic pathogen responsible for 15% of AIDS-related deaths worldwide. Mortality primarily results from meningoencephalitis, which occurs when fungal cells disseminate to the brain from the initial pulmonary infection site. A key C. neoformans virulence trait is the polysaccharide capsule. Capsule shields C. neoformans from immune-mediated recognition and destruction. The main capsule component, glucuronoxylomannan (GXM), is found both attached to the cell surface and free in the extracellular space (as exo-GXM). Exo-GXM accumulates in patient serum and cerebrospinal fluid at microgram/milliliter concentrations, has well-documented immunosuppressive properties, and correlates with poor patient outcomes. However, it is poorly understood whether exo-GXM release is regulated or the result of shedding during normal capsule turnover. We demonstrate that exo-GXM release is regulated by environmental cues and inversely correlates with surface capsule levels. We identified genes specifically involved in exo-GXM release that do not alter surface capsule thickness. The first mutant, the liv7Δ strain, released less GXM than wild-type cells when capsule was not induced. The second mutant, the cnag_00658Δ strain, released more exo-GXM under capsule-inducing conditions. Exo-GXM release observed in vitro correlated with polystyrene adherence, virulence, and fungal burden during murine infection. Additionally, we found that exo-GXM reduced cell size and capsule thickness under capsule-inducing conditions, potentially influencing dissemination. Finally, we demonstrated that exo-GXM prevents immune cell infiltration into the brain during disseminated infection and highly inflammatory intracranial infection. Our data suggest that exo-GXM performs a distinct role from capsule GXM during infection, altering cell size and suppressing inflammation.