Stratospheric Aerosol and Gas Experiment (SAGE) III aerosol extinction data from the Arctic in December 2002 are presented and used to illustrate the instrument's capability for polar stratospheric cloud (PSC) observations. Numerous PSCs were observed during the month at potential temperatures from about 450--700 K, and Types 1a and 1b PSCs could be discriminated in plots of 1022-nm extinction versus color ratio (the ratio of 1022-nm and 449-nm extinctions). Type 1a (1b) PSCs were observed primarily above (below) a threshold temperature of 4 K below the nitric acid trihydrate (NAT) equilibrium temperature. Mie calculations show that some of the Type 1a PSC observations are consistent with a mixture of background aerosol and very few large NAT particles. This suggests that SAGE III offers the potential for systematic observations of these clouds, which would greatly improve our understanding of how they form and lead to stratospheric denitrification.