Of the various types of industry-generated effluents, those containing organic pollutants such as phenols are generally difficult to remediate. There is a need to develop new technologies that emphasize the destruction of these pollutants rather than-their disposal. In this work the white rot fungus, Trametes pubescens, was demonstrated to be an effective bioremediation agent for the treatment of phenolic wastewaters. Am airlift loop reactor was optimized, in terms of volumetric oxygen transfer rate (K(L)a = 0.45 s(-1)), to provide an environment suited to rapid growth of T. pubescens (mu = 0.25 day(-1)) and a particularly efficient growth yield on glucose of 0.87 g biomass center dot g glucose(-1). The phenolic effluent was shown to be a paramorphogen, influencing fungal pellet morphology in the reactor, as well as increasing laccase enzyme activity by a factor of 5 over the control, to a maximum of 11.8 U center dot mL(-1). This increased activity was aided by the feeding of nonrepressing amounts (0.5 g center dot L-1) of glucose to the reactor culture. To our knowledge the degradation results represent the highest rate of removal (0.033 g phenol center dot g biomass(-1)center dot day(-1)) of phenolic compounds from water reported for white rot fungi.