The removal of polycyclic aromatic hydrocarbons from aqueous culture medium by the lignin-degrading marine fungus NIOCC 312, obtained from decaying seagrass from a coral reef lagoon is reported here. The percentage of phenanthrene removed from the culture supernatant and the fungal biomass after 6 days is estimated. About 60-70% of phenanthrene, at a concentration of 12 mgl-1 (12 ppm) was removed from the culture medium containing live or heat-killed fungus, as estimated by fluorescence spectroscopy method. Nuclear magnetic resonance spectra of the phenanthrene extracted from the fungal biomass revealed that in the heat-killed fungal biomass, the phenanthrene remained undegraded till day 6. On the other hand in the live fungal biomass, no phenanthrene was detected on day 6 suggesting that it was metabolized or transformed into non-aromatic fragments. It is concluded that the disappearance of phenanthrene from the aqueous culture medium is due to its instant adsorption to the fungal biomass owing to the presence of the exopolymeric substance (EPS) around the fungal hyphae. The EPS produced by the fungus was partially characterized. It is hypothesized that phenanthrene thus adsorbed by the live fungal biomass was subsequently degraded by the lignin-degrading enzymes present in the cell wall and the EPS envelope. Thus, the heat-killed fungal biomass could be used only for adsorption of PAHs from contaminated sites whereas use of the live fungal biomass would result in degradation of PAHs