Mechanism of lignin biodegradation caused by basidiomycetes and the history of lignin biodegradation studies were briefly reviewed. The important roles of fungal extracellular ligninolytic enzymes such as lignin and manganese peroxidases (LiP and MnP) were also summarized. These enzymes were unique in their catalytic mechanisms and substrate specificities. Either LiP or MnP system is capable of oxidizing a variety of aromatic substrates via a one-electron oxidation. Extracellular fungal system for aromatic degradation is non-specific, which recently attracts many people working a bioremediation field. On the other hand, an intracellular degradation system for aromatic compounds is rather specific in the fungal cell. Structurally similar compounds were prepared and metabolized, indicating that an intracellular degradation strategy consisted of the cellular systems for substrate recognition and metabolic response. It was assumed that lignin-degrading fungi might be needed to develop multiple metabolic pathways for a variety of aromatic compounds caused by the action of non-specific ligninolytic enzymes on lignin. Our recent results on chemical stress responsible factors analyzed using mRNA differential display techniques were also mentioned.