Removal and degradation of pentachlorophenol (PCP) by Phanerochaete chrysosporium in static flask cultures was studied using ammonium lignosulphonates (LS), a waste product of the papermill industry, as a carbon and nitrogen source. After 3 days, cultures of P. chrysosporium grown in either a 2% LS (nitrogen-sufficient) medium or a 0.23% LS and 2% glucose (nitrogen-deficient) medium removed 72 to 75% of PCP, slightly less than the 95% removal seen using nitrogen-deficient glucose and ammonia medium. PCP dehalogenation occurred despite the fact that extracellular enzyme (LiP) activity, measured by a veratryl alcohol oxidation assay and by PCP disappearance in cell-free extracts, was inhibited by LS. This inactivation of LiP likely contributed to the lower percent of PCP dehalogenation observed using the LS media. In order to better understand the relationship between PCP disappearance and dehalogenation, we measured the fate of the chlorine in PCP. After 13 days, only 1.8% of the initial PCP added was recoverable as PCP. The remainder of the PCP was either mineralized or transformed to breakdown intermediates collectively identified as organic halides. The largest fraction of the original chlorine (58%) was recovered as organic (non-PCP) halide, most of which (73%) was associated with the cell mass. Of the remaining chlorine, 40% was released as chloride ion, indicating a level of dehalogenation in agreement with previously reported values.