Biodegradation of pentachlorophenol (PCP) by the free-cell and polyurethane immobilized white-rot fungus Trametes versicolor was investigated in batch and continuous bioreactors. Results with both active and deactivated fungus showed that the degradation process proceeds intracellularly after initial uptake by the mycelia. However, unpurified extracellular fluid alone showed negligible PCP degradation. The polyurethane immobilized T. versicolor fungal bioreactor, previously demonstrated for the treatment of kraft bleach plant effluents, yielded greater than a 99% removal within 12 h for inlet PCP concentrations ranging from 20 to 25 mg/l. A substrate inhibition model adequately described PCP degradation kinetics in the prepolymer immobilized fluidized bed bioreactor system.