This study demonstrated that the brown rot basidiomycete Fomitopsis palustris was able to degrade crystalline cellulose (Avicel). This fungus could also produce the three major cellulases (exoglucanases, endoglucanases, and $eta-glucosidase$) when the cells were grown on $2.0\%$ Avicel. Avicel degraded by F. palustris showed a decrease in relative crystallinity from $83\%;to;78.5\%$ after 14 days of incubation. The characterization study indicated that optimum pH was 4.5 and optimum temperature was $70^{circ}C$ for exoglucanase (cellobiohydrolase) activity. Hydrolysis of Avicel by the crude enzyme from F. palustris yielded 1.6 mg/ml of glucose after 43 h, which corresponded to a cellulose conversion degree of $3.2\%$. Therefore, this study revealed for the first time that the brown rot basidiomycete F. palustris produces cellulases capable of yielding soluble sugars from crystalline cellulose.