Three fungal strains were collected from decomposed woods in Kyaukse wood mill and five fungal strains from effluent sludge by continuous pulp and paper industry. Among the accumulated strains, WF4, WF5, WF8, SF1 and SF3 are able to grow up well on agar containing some pieces of powdered bamboo and sawdust indicating that they could utilize these powders as nutrient for their growth. When they were tested for their effectiveness on decolourization of the wastewater from the pulp and paper industry, it indicated that strain WF5 was the most efficient strain which has the ability to decolorize the wastewater by (58%±0.4) and degrade the lignin by (3104±232) respectively.