Triaxial compression experiments were performed on the Four-mile gneiss. The biotite foliation in the Four-mile gneiss results in dilatancy and strength anisotropies, which become more pronounced with increasing confining pressure. Microstructural observations indicate that when there is high resolved shear stress on the macroscopic foliation, dilatancy arises from extensile microcracks nucleated by frictional slip on biotite grains. Evolution of crack geometry and coalescence are also influenced by the biotite foliation. Motivated by these observations, a damage mechanics model based on sliding wing cracks was adopted to analyze the anisotropic development of dilatancy and brittle fracture. Frictional coefficients for the sliding cracks are inferred to be comparable to those of cleavage surfaces of biotite. The strength anisotropy data of the Four-mile gneiss can be explained by the variation of the initial damage with the foliation angle. The damage derives from a set of preexisting microcracks with random orientation, and a set of cleavage cracks in mica grains preferentially oriented along the foliation angle. Hence, the initial damage is higher for the intermediate angles, and, consequently, the strength is somewhat lower. The observation that the mechanical strengths of a variety of foliated rocks decrease with increasing mica content can be explained by the same model, with the implication that the initial damage and mica content are linearly related. The mechanical and microstructural data show that dilatancy anisotropy may significantly influence the progressive development of borehole breakout and strain localization.