Aims To demonstrate the plant growth-promoting potential of a wood-decay mushroom. Methods and Results A wild strain of a white rot fungus (Pleurotus pulmonarius) was found to convert 10 mmol l(-1) L-tryptophan (TRP) to approximately 15 mu g ml(-1) indole-3-acetic acid (IAA) under the optimal growth conditions of 30 degrees C and pH 5 for 15 days. Results of gas chromatography-mass spectrometry indicated IAA synthesis through the indole-3-pyruvic acid pathway when using cellulose as a sole carbon source. The mycelium as well as the culture filtrate promoted the growth and chlorophyll content of seedlings. In a monocotyledonous plant (rice), the number of lateral roots was increased experimentally, whereas in a dicotyledonous plant (tomato), the fungus led to an increased length of shoots and roots. Conclusions TRP-dependent IAA production was demonstrated for the first time for P. pulmonarius and may be responsible for enhancing plant growth in vitro. Significance and Impact of the Study Synthesis of IAA as the most prevalent phytohormone in plants has been demonstrated for soil microfungi. Pleurotus pulmonarius is reported as an IAA-producing wood-decay macrofungus. The higher temperature optimum of P. pulmonarius isolated from subtropical environment compared to other Pleurotus species from temperate regions makes it more suitable for application in subtropical/tropical regions.