White rot fungi efficiently degrade lignin, a complex aromatic polymer in wood that is among the most abundant natural materials on earth. These fungi use extracellular oxidative enzymes that are also able to transform related aromatic compounds found in explosive contaminants, pesticides and toxic waste. We have sequenced the 30-million base-pair genome of Phanerochaete chrysosporium strain RP78 using a whole genome shotgun approach. The P. chrysosporium genome reveals an impressive array of genes encoding secreted oxidases, peroxidases and hydrolytic enzymes that cooperate in wood decay. Analysis of the genome data will enhance our understanding of lignocellulose degradation, a pivotal process in the global carbon cycle, and provide a framework for further development of bioprocesses for biomass utilization, organopollutant degradation and fiber bleaching. This genome provides a high quality draft sequence of a basidiomycete, a major fungal phylum that includes important plant and animal pathogens.