The present study mainly investigated the ability of solid-state cultures of the non-pathogenic Fusarium oxysporum strain BAFC 738 to transform aromatic components to reduce the phytotoxicity in olive-mill dry residue (DOR), the waste from the two-phase manufacturing process. Lignin, hemicellulose, fats and water-soluble extractives contents of DOR colonized by the fungus for 20 weeks were reduced by 16%, 25%, 71% and 13%, respectively, while the cellulose content increased by 25%. In addition, the ethyl acetate-extractable phenolic fraction of the waste was reduced by 65%. However, mass-balance ultra-filtration and size-exclusion chromatography experiments suggested that the apparent removal of that fraction, mainly including 2-(3,4-dihydroxyphenyl)ethyl alcohol and 2-(4-hydroxyphenyl)ethyl alcohol, was due to polymerization. Mn-peroxidase and Mn-independent peroxidase activities were found in F. oxysporum solid-state cultures, while laccase and aryl alcohol oxidase activities were not detected. Tests performed with seedlings of tomato (Lycopersicum esculentum L.), soybean (Glycine maximum Merr.), and alfalfa (Medicago sativa L.) grown on soils containing 6% (w/w) of bioconverted DOR (kg soil)(-1) showed that the waste's phytotoxicity was removed by 20 weeks-old fungal cultures. By contrast, the same material exhibited a high residual toxicity towards lettuce (Lactuca sativa L.). (C) 2006 Elsevier Ltd. All rights reserved.