Social graphs have received renewed interest as a research topic with the advent of social networking websites. These online networks provide a rich source of data to study user relationships and interaction patterns on a large scale. In this paper, we propose a generative Bayesian model for extracting latent communities from a social graph. We assume that community memberships depend on topics of interest between users and the link relationships between them in the social graph topology. In addition, we make use of the nature of interaction to gauge user interests. Our model allows communities to be related to multiple topics and each user in the graph can be a member of multiple communities. This gives an insight into user interests and topical distribution in communities. We show the effectiveness of our model using a real world data set and also compare our model with existing community discovery methods. © 2011 ACM.