A strain of fungi was isolated from soil, which was identified as Penicillium simplicissimum. This strain was capable of utilizing several lignin model compounds, making aromatic dyes decoloration and degrading natural lignin. All these results proved that Penicillium simplicissimum has ligninolytic ability. Three kinds of enzymes were believed to be the most important catalyzes in the biodegrading process. They are lignin peroxidase (LiP), laccase (Lac) and hemicellulase. And they always work synergistically. After 25 days' incubation, the amount of rice straw lignin decreased 0.23g, and the degrading rate was 14.94%. Different from the degrading mechanism of the white-rot fungi, the lignin degradation by P. simplicissimum mainly happened during the primary metabolism and it was greatly influenced by the pH of media, the concentration of Cu2+ and Mn2+.