Palm-oil mill fiber (POMF) is a fibrous, natural hard material discharged in enormous amounts from palm-oil mills in tropical plantations: therefore, research to find microorganisms that decompose POMF was conducted. As the result of screening, a new thermophilic fungus, Chaetomium sp. nov. MS-017, exhibiting rapid growth on POMF was isolated from rotted wood. Based on partial characterization of the decomposition of POMF, it was shown that MS-017 preferentially assimilates poly saccharides, especially hemicelluloses such as xylan. A preliminary composting study indicated that MS-017 produced 855 g of decomposed product from 1,000 g of intact POMF in 12 days under optimized solid-culture conditions. The decomposition rate of POMF was 23% (w/w), and the cell yield calculated from consumed POMF was as high as 36% (w/w). These results indicate that MS-017 has a very high potential to decompose POMF and that it is suitable for economical production of compost to recycle by-product biomass from oil-palm plantations.