The Collaborative International Dictionary of English v.0.48:

Cottony \Cot"ton*y\ (-?), a.
   1. Covered with hairs or pubescence, like cotton; downy;
      nappy; woolly.
      [1913 Webster]

   2. Of or pertaining to cotton; resembling cotton in
      appearance or character; soft, like cotton.
      [1913 Webster]

WordNet (r) 3.0 (2006):

cottony
    adj 1: resembling cotton; as soft as cotton