Aims: Some Cry proteins produced by the soil bacterium Bacillus thuringiensis (Bt) or by transgenic Bt plants persist in agricultural soils for an extended period of time, which may pose a hazard for nontarget soil organisms. The aims of our study were to screen for soil fungi capable of degrading the Cry1Ac toxin and to identify the mechanisms that lead to the inactivation of this protein. Methods and Results: Of the eight fungal strains screened, only one, Chrysosporium sp., was found to produce extracellular proteases capable of degrading the 66-kDa Cry1Ac at the N-terminal end of amino acid 125 (alanine). The proteolytic products of the Cry1Ac toxin did not exhibit any insecticidal activity against Helicoverpa armigera, in contrast to its high toxicity exhibited in the native form. Conclusions: Proteases elaborated by the Chrysosporium sp. degrade the Cry1Ac toxin in a way that it looses its insecticidal activity against H. armigera. Significance and Impact of the Study: Chrysosporium sp., a specific soil micro-organism capable of producing proteases that degrade the Cry1Ac toxin into inactive products under controlled conditions is being reported for the first time. Application of this observation needs to be further tested in field conditions.