Thirty filamentous fungal strains were isolated from effluents of a stainless steel industry (Minas Gerais, Brazil) and tested for phenol tolerance. Fifteen strains of the genera Fusarium sp., Aspergillus sp., Penicillium sp. and Graphium sp. tolerants up to 10 mM of phenol were selected and tested for their ability to degrade phenol. Phenol degradation was a function of strain, time of incubation and initial phenol concentration. FIB4, LEA5 and AE2 strains of Graphium sp. and FE11 of Fusarium sp. presented the highest percentage phenol degradation, with 75% degradation of 10 mM phenol in 168 It for FIB4. A higher starting cell density of Graphium sp. FIB4 lead to a decrease in the time needed for full phenol degradation and increased the phenol degradation rate. All strains exhibited activity of catechol 1,2-dioxygenase and phenol hydroxylase in free cell extracts obtained from cells grown on phenol, suggesting that catechol was oxidized by the ortho type of ring fission. These data reported demonstrate the prospect after the application of filamentous fungal strains in protecting the environment from phenol pollution. (C) 2003 Elsevier Ltd. All rights reserved.