Perchloroethylene (PCE) is one of the most important groundwater pollutants around the world. It is a suspected carcinogen and is believed to be recalcitrant to microbial degradation. We report here, for the first time, aerobic degradation of PCE by the white rot fungus, Trametes versicolor, to less hazardous products. Aerobic degradation rate of PCE was 0.20 and 0.28 nmol h-1 mg-1 dry weight of fungal biomass. Trichloroacetic acid (TCA) was identified as the main intermediate using 2-13C-PCE as the substrate. Chloride released and TCA produced were stoichiometric with PCE degradation. Our studies using 1-aminobenzotriazole (ABT), an inhibitor of cytochrome P-450, suggested that a cytochrome P-450 system may be involved in PCE degradation by T. versicolor. These results are of particular interest because TCA production from PCE has not been reported to date in bacteria or fungi.