In vivo detoxification of furfural by the oleaginous yeast, Trichosporon fermentans, under lipid-producing (i.e., nitrogen-limited) conditions was evaluated for the first time. During the initial fermentation phase, furfural was rapidly reduced to furfuryl alcohol, which is more toxic to T. fermentans than furfural. Furfuryl alcohol was subsequently oxidized to furoic acid which has low toxicity to T. fermentans and is the end product of the in vivo detoxification of furfural in this organism. These observations explain how T. fermentans can grow and accumulate lipids in medium containing furfural. They also indicate that strategies to minimize the transient production of furfuryl alcohol could further improve the capacity of the strain to produce lipids from furfural-containing lignocellulosic hydrolysates.