Ceriporiopsis subvermispora CZ-3, a wood degrading white rot fungus, was able to decolourize and degrade the first extraction stage effluent from kraft pulp bleaching at lower co-substrate concentration than the basidiomycetes previously investigated. With glucose at 1 g l(-1), this fungus removed up to 90% colour, 45% GOD, 62% lignin, 32% AOX, and 36% EOX in 48 h at temperatures of 30-35 degrees C and pH 4.0-4.5. In the absence of glucose, the fungus removed up to 62% of the colour. Significant reduction in chlorinated aromatic compounds was observed and toxicity to zebra fish was completely eliminated. The fungal mycelium could be immobilized in polyurethane foam and used repeatedly to treat batches of effluent. The molecular weight of chlorolignins was substantially reduced.