The ability of the fungus Fusarium oxysporum to solubilize lignite was found to depend on the presence of a specific carbon source. When grown on glucose or another carbohydrate, the fungus is unable to solubilize coal but it produces the red dye bikaverin. In the coal-solubilizing state, which can be induced by cultivation in the presence of glutamate or gluconate, the fungus does not produce bikaverin. The presence or absence of the pigment can therefore be taken as an indicator of the ability of the fungus to solubilize coal. Addition of extracted and purified bikaverin to F. oxysporum growing on glutamate or gluconate inhibits coal solubilization. Hence, F. oxysporum offers a suitable system for investigating the mechanisms of microbial coal degradation by comparing the two growth-substrate-controlled physiological states.