Aims: To demonstrate the plant growth-promoting potential of a wood-decay mushroom. Methods and Results: A wild strain of a white rot fungus (Pleurotus pulmonarius) was found to convert 10 mmol l−1 L-tryptophan (TRP) to approximately 15 μg ml−1 indole-3-acetic acid (IAA) under the optimal growth conditions of 30°C and pH 5 for 15 days. Results of gas chromatography–mass spectrometry indicated IAA synthesis through the indole-3-pyruvic acid pathway when using cellulose as a sole carbon source. The mycelium as well as the culture filtrate promoted the growth and chlorophyll content of seedlings. In a monocotyledonous plant (rice), the number of lateral roots was increased experimentally, whereas in a dicotyledonous plant (tomato), the fungus led to an increased length of shoots and roots. Conclusions: TRP-dependent IAA production was demonstrated for the first time for P. pulmonarius and may be responsible for enhancing plant growth in vitro. Significance and Impact of the Study: Synthesis of IAA as the most prevalent phytohormone in plants has been demonstrated for soil microfungi. Pleurotus pulmonarius is reported as an IAA-producing wood-decay macrofungus. The higher temperature optimum of P. pulmonarius isolated from subtropical environment compared to other Pleurotus species from temperate regions makes it more suitable for application in subtropical/tropical regions.