The white-rot fungus Phanerochaete chrysosporium can degrade macromolecules in low-rank coal, offering the potential for converting coal to specific products. We investigated the influence of temperature, veratryl alcohol and oxygen on transformation of a solubilised fraction of Morwell brown coal (SWC6 coal) and on the activity of lignin peroxidase and manganese (Mn) peroxidase in N-limited cultures of P. chrysosporium. After 20 days, the mass and A400 of SWC6 coal recovered from cultures containing 0.03% SWC6 coal, incubated at 28°C under hyperbaric oxygen, were reduced by over 95%. The modal apparent molecular mass of the residuum was reduced by 50%. Addition of 2 mM veratryl alcohol had little effect on the transformation of SWC6 coal. The extent of transformation was reduced in cultures incubated at 37°C or under air. In cultures under air, coal molecules were transiently polymerised. Decolourisation of SWC6 coal reflects conversion to products that cannot be recovered from the mediuip, not the destruction of chromophores within recoverable material. The activity of lignin peroxidase, measured in cultures free of SWC6 coal to avoid interference with the assay, correlates directly with the degradation of SWC6 coal as measured by the decline in A400. The data suggest that lignin peroxidase is more important than Mn peroxidase in converting SWC6 coal to products that are assimilated by cells.