Made from depleted uranium, cold iron, basil and some sort of dung, ghost dust affects ghosts even in the mortal plane. Upon contact, it sparks into "blazing motes of scarlet light", apparently causing them pain and immobilizing their ectoplasmic flesh.
In the Nevernever, the weight of the ghost dust increases significantly, weighing "thirty or forty pounds" for a small pouch. Dresden believes that, if released, it would tear a hole in the Nevernever.
In the series
In Ghost Story, Mortimer Lindquist has a variation of ghost dust mixed into the paint in his house to prevent ghosts from entering. It is apparently made with a different recipe than the one Dresden uses.