These results provide the first account of the breakdown and utilization of DNA by an ericoid mycorrhizal fungus, and of its phosphodiesterase activity in vitro. Hymenoscyphus ericae (Read) Korf & Kernan grew well on DNA as a sole source of phosphorus (P), achieving greater mycelium dry weight than on an equivalent concentration of P supplied as orthophosphate. Some characteristics of the production and activity of extracellular (culture filtrate) and cell-wall bound phosphodiesterase in H. ericae are reported. At least part of the phosphodiesterase activity is attributed to the exonuclease F nucleotide diesterase on the basis of its high affinity for a specific substrate of this enzyme, The pH optima for extra-cellular and cell-wall-bound diesterase are acidic (pH 4.0–5.5), with considerable activity maintained in the pH range typical of organic soils under ericaceous plants (pH 3.0–4.5). The production of phosphodiesterase was not substrate-induced, since highest specific activity for wall-bound enzyme was found in culture grown without organic or inorganic P. The results are discussed in relation to the ecology and biology of acid organic soils on which ericaceous plants are dominant.