Higher fungi have a widespread capacity for biosynthesis of organohalogens. Commonly occurring chloroaromatic fungal metabolites can end up in anaerobic microniches at the boundary of fungal colonies and wetland soils. The aim of this study was to investigate the environmental fate of a major fungal metabolite, 3,5-dichloro-p-anisyl alcohol, under anaerobic conditions. This compound was incubated with methanogenic sludge to study its biotransformation reactions. Initially, 3,5-dichloro-p-anisyl alcohol was readily demethylated in stoichiometric quantities to 3,5-dichloro-4-hydroxybenzyl alcohol. The demethylated product was converted further via two routes: a biotic route leading to the formation of 3,5-dichloro-4-hydroxybenzoate and 2,6-dichlorophenol, as well as an abiotic route leading to the formation of bis(3,5-dichloro-4-hydroxyphenyl)methane. In the first route, the benzyl alcohol moiety on the aromatic ring was oxidized, giving 3,5-dichloro-4-hydroxybenzoate as a transient or accumulating product, depending on the type of methanogenic sludge used. In sludge previously adapted to low-molecular-weight lignin from straw, a part of the 3,5-dichloro-4-hydroxybenzoate was decarboxylated, yielding detectable levels of 2,6-dichlorophenol. In the second route, 3,5-dichloro-4-hydroxybenzyl alcohol dimerized, leading to the formation of a tetrachlorinated bisphenolic compound, which was identified as bis(3,5-dichloro-4-hydroxyphenyl)methane. Since formation of this dimer was also observed in incubations with autoclaved sludge spiked with 3,5-dichloro-4-hydroxybenzyl alcohol, it was concluded that its formation was due to an abiotic process. However, demethylation of the fungal metabolite by biological processes was a prerequisite for dimerization. The most probable reaction mechanism leading to the formation of the tetrachlorinated dimer in the absence of oxygen is presented, and the possible environmental implications of its natural occurrence are discussed.