The biological upgrading of wheat straw with Streptomyces cyaneus was examined through the analysis of chemical and structural changes of the transformed substrate during solid-state fermentation. Analysis of enzymes produced during the growth of S. cyaneus showed that phenol oxidase was the predominant enzyme. The reduction in Klason lignin content (16.4%) in the transformed substrate indicated the ability of this strain to delignify lignocellulose residues and suggests a role for phenol oxidase in the bacterial delignification process. Microscopic examination of the transformed substrate showed that the initial attack occurred at the less lignified cell walls (phloem and parenchyma), while xylem and sclerenchyma were slowly degraded. The pattern of degradation of sclerenchymatic tissues by S. cyaneus showed delamination between primary and secondary walls and between S-1 and S-2 due to partial removal of lignin. In the later stages of the decay a disorganization of the secondary walls was detected on account of fibrillation of this layer. A comparison of the properties of the pulp from wheat straw transformed by S. cyaneus with untreated wheat straw showed that pretreatment improved the characteristics that determine the quality of pulp. This was indicated by an increase in pulp brightness and by a decrease in the kappa number. These changes occurred without significantly affecting the viscosity, a measure of the quality of the cellulose fibres. These results support the potential application of this organism or its oxidative enzymes in biopulping.