The white-rot basidiomycete Phanerochaete chrysosporium metabolized 3-(4'-ethoxy-3'-methoxyphenyl)-2-(4''-methoxyphenyl)propionic acid (V) in low-nitrogen, stationary cultures, conditions under which ligninolytic activity is expressed. The ability of several fungal mutant strains to degrade V reflected their ability to degrade [C]lignin to CO(2). 1-(4'-Ethoxy-3'-methoxyphenyl)-2-(4''-methoxyphenyl)-2- hydroxyethane (VII), anisyl alcohol, and 4-ethoxy-3-methoxybenzyl alcohol were isolated as metabolic products, indicating an initial oxidative decarboxylation of V, followed by alpha, beta cleavage of the intermediate (VII). Exogenously added VII was rapidly converted to anisyl alcohol and 4-ethoxy-3-methoxybenzyl alcohol. When the degradation of V was carried out under O(2), O was incorporated into the beta position of the diarylethane product (VII), indicating that the reaction is oxygenative.