Copied from my post on another thread:

System 6 and 7 up to 7.5 only support partitions up to 2 GB, but will support a drive larger than 2 GB if partitioned into 2 GB sections. However, Apple's drive partitioning tools only support eight partitions per drive, so you're looking at only 16 GB accessible.

System 7.5 increased the max size of a partition to 4 GB. System 7.5.2 later increased the maximum size to 2 TB, but only on Macs with built-in PCI slots.