We introduce a new graph parameter, called the Grothendieck constant of a graph G = (V, E), which is defined as the least constant K such that for every A : E R, sup f:V S|V |-1 {u,v}E A(u, v) ? f(u), f(v) K sup :V {-1,+1} {u,v}E A(u, v) ? (u)(v). The classical Grothendieck inequality corresponds to the case of bipartite graphs, but the case of general graphs is shown to have various algorithmic applications. Indeed, our work is motivated by the algorithmic problem of maximizing the quadratic form {u,v}E A(u, v)(u)(v) over all : V {-1, 1}, which arises in the study of correlation clustering and in the investigation of the spin glass model. We give upper and lower estimates for the integrality gap of this program. We show that the integrality gap is O(log (G)), where (G) is the Lov?asz Theta Function of the complement of G, which is always smaller than the chromatic number of G. This yields an efficient constant factor approximation algorithm for the above maximization problem for a...