A study is made of the attenuation of acoustic waves by a suspension of fluid droplets in a fluid medium. Special attention is given to the case of small droplets for which the effect of the surface tension is not negligible. The droplets are allowed to execute large translational motion and to undergo a small deformation from a spherical shape. It is shown that the result of Epstein and Carhart on the attenuation of sound waves in a gas with the suspension of liquid droplets is applicable even when the displacement of the droplet is large compared to its radius. The effect of surface tension is to increase sound attenuation in two-phase medium by increasing the thermal dissipation. This effect is important in the suspension of gaseous bubbles in liquid for small droplets and is negligible in the case of a gaseous medium containing liquid droplets. The explicit forms for attenuation, the drag force on droplets, and the heat transfer rate between phases are given for the case which is applicable to a gas containing liquid and solid droplets. The expression for the attenuation which is applicable to the suspension of gaseous bubbles in a liquid is also given and is found to be completely dominated by the thermal dissipation.