Under secondary metabolic conditions, the white-rot basidiomycete Phanerochaete chrysosporium degraded 2,7-dichlorodibenzo-p-dioxin (I). The pathway for the degradation of I was elucidated by the characterization of fungal metabolites and oxidation products generated by lignin peroxidase (LiP), manganese peroxidase (MnP), and crude intracellular cell-free extracts. The multistep pathway involves the degradation of I and subsequent intermediates by oxidation, reduction, and methylation reactions to yield the key intermediate 1,2,4-trihydroxybenzene (III). In the first step, the oxidative cleavage of the dioxin ring of I, catalyzed by LiP, generates 4-chloro-1,2-benzoquinone (V), 2-hydroxy-1,4-benzoquinone (VIII), and chloride. The intermediate V is then reduced to 1-chloro-3,4-dihydroxybenzene (II), and the latter is methylated to form 1-chloro-3,4-dimethoxybenzene (VI). VI in turn is oxidized by LiP to generate chloride and 2-methoxy-1,4-benzoquinone (VII), which is reduced to 2-methoxy-1,4-dihydroxybenzene (IV). IV is oxidized by either LiP or MnP to generate 4-hydroxy-1,2-benzoquinone, which is reduced to 1,2,4-trihydroxybenzene (III). The other aromatic product generated by the initial LiP-catalyzed cleavage of I is 2-hydroxy-1,4-benzoquinone (VIII). This intermediate is also generated during the LiP- or MnP-catalyzed oxidation of the intermediate chlorocatechol (II). VIII is also reduced to 1,2,4-trihydroxybenzene (III). The key intermediate III is ring cleaved by intracellular cell extracts to produce, after reduction, beta-ketoadipic acid. In this pathway, initial oxidative cleavage of both C-O-C bonds in I by LiP generates two quinone products, 4-chloro-1,2-benzoquinone (V) and 2-hydroxy-1,4-benzoquinone (VIII). The former is recycled by reduction and methylation reactions to generate an intermediate which is also a substrate for peroxidase-catalyzed oxidation, leading to the removal of a second chlorine atom. This unique pathway results in the removal of both aromatic chlorines before aromatic ring cleavage takes place.