TECHNOLOGY FOCUS - BIOTECHNOLOGY - Preferred Method: The ACQ-tolerant fungus is chosen from Meruliporia incrassata (TFFH-294), Antrodia radiculosa (MJL-630) and A.radiculosa (FP-90848-T), preferably A.radiculosa (FP-90848-T). (I) is chosen from sawdust, wood chips, rice straw, corn stalks, and wheat straw. (II) is chosen from corn steep liquor, corn meal and wheat bran. The inoculated wood is aerated and hydrated in dark, aerobic conditions, at a relative humidity of about 70%, and at 20-35 degrees C, preferably 27-32 degrees C. The degradation product of wood exhibits a loss in dry weight of an amount in excess of 5% of the dry weight of the wood. The ACQ-tolerant fungus and matrix combination is grown at temperature of 25-32 degrees C. The volume of (I) is about 25-33% the volume of sterile water and the volume of (II) is about 1-5% the volume of sterile water. EXAMPLE - A degradation study was performed using fungal strains exhibiting tolerance to either chromated copper arsenate (CCA), ammoniacal copper quat (ACQ), creosote or pentachlorophenol. The fungal strains were Meruliporia incrassata (TFFH-294), Antrodia radiculosa (MJL-630), M.incrassata (Mad-563), A.radiculosa (FP-90848-T), A.radiculosa (FP-103272-sp), A.radiculosa (FP-105309-R), A.radiculosa (L-11659-sp), and Neolentinus lepideus (Mad-534). Blocks of wood were cut (1x1x0.3 inches) from Southern pine (Pinus sp.) and treated to CCA, ACQ, creosote and pentachlorophenol. The blocks of wood were sterilized and allowed to cool. Degradation of the treated wood block was observed by placing the sterile block on the surface of the fungal inoculum in the glass bottle. Fungi strains known to be tolerant to a specific preservative were exposed to blocks having their respective preservative. The blocks were then incubated for 10 weeks at 27 degrees C and 70% RH. After 10 weeks, the remaining portion of the blocks were removed and their dry weight loss was measured according to ASTM standards. Results showed that the fungal strains of Meruliporia incrassata (TFFH-294), Antrodia radiculosa (MJL-630), M.incrassata (Mad-563), and A.radiculosa (FP-90848-T) were able to degrade the CCA-treated wood at an average of greater than 20% of the original dry weight of the wood. A.radiculosa (FP-90848-T) was also able to degrade ACQ-treated wood at an average of 29.9% of the original dry weight. A.radiculosa strains FP-103272-sp, L-11659-sp, and FP-90848-T, and M.incrassata (Mad-563) were able to degrade on average approximately 3% of the wood block having a concentration of Pentachlorophenol. A.radiculosa strains FP-103272-sp, L-11659-sp, and FP-105309-R and Neolentinus lepideus (Mad-534) exhibited the ability to reduce the dry weight of wood having creosote by an average of approximately 3%. A study was also performed to determine what effect the additives had on the ability of certain fungal strains to degrade preservative-treated wood. A fungal inoculum was prepared for each strain using one of the selected fungi. First, the fungus was grown on 10 ml malt extract agar in a glass bottle (2x2x5 h inches) and incubated at 27 degrees C, 70% RH, for 1-2 weeks until a confluent growth on the agar layer occurred. A mixture of soft wood and hard wood sawdust was sterilized and set for use as a lignocellulosic substrate. Separate fungal inocula were prepared containing a nutrient supplement of either corn steep liquor or corn meal and wheat bran. For the inoculum containing corn steep liquor, 10 g of the sterile sawdust was mixed with 20 ml of sterile water containing 10% commercial corn steep liquor (v/v) and added to the glass bottle containing the fungal growth. For the inoculum containing corn meal and wheat bran, 10 g of the sterile sawdust was combined with the corn meal and wheat bran at 2.5% (w/w, 0.25 g corn meal or wheat bran/10 g sawdust) for each ingredient, followed by 20 ml of sterile water. The inoculum was then added to another glass bottle containing the fungal growth. Incubation was continued in a stationary condition and at a temperature of 27 degrees C and 70% RH. The length of incubation depended on the rate of fungal growth, however, after about 4-6 weeks of incubation fungal mycelia growth was obvious. The results showed that the additives enhance degradation of preservative-treated wood.