In this work, fermentation and formulation aspects of the nematophagous fungus Hirsutella rhossiliensis BBA were investigated. When incubated in 2% (w/w) glucose and 0.5% (w/w) yeast extract medium in a 1-L Erlenmeyer flask without baffles, heavy pellet formation was observed. Only 40% of the mycelium had a size less than 500 mu m. When a flask with three baffles was used, the portion of mycelium <500 mu m rose to 95%. In the next step, the influence of aeration rate and stirrer speed on production of finely dispersed mycelium in a stirred tank reactor was investigated. The best fermentation results were obtained at 0.4 vvm and 400 rpm stirrer speed with 90% mycelium <500 mu m and 5 g/L biomass. Then, mycelium was microencapsulated in hollow beads based on sulfoethylcellulose (SEC). Experiments on the capsule nutrient reservoir showed that 15% (w/w) corn gluten and 0.5% (w/w) yeast extract could be replaced with 3% (w/w) autoclaved baker's yeast which was never used as capsule additive before. Radial growth of mycelium out of dried hollow beads containing 1% (w/w) biomass and 3% (w/w) baker's yeast was faster than for alginate beads containing equivalent amounts of biomass and yeast indicating a higher bio-control potential.