Fungi are ecologically important decomposers of lignocellulose. Basidiomycetes use peroxidases, laccases, and enzymes of the cytochrome P450 superfamily for cometabolic lignin degradation in order to access cellulose and hemicellulose as carbon sources.Limited lignin modification capabilities have also been reported for some terrestrial ascomycetes. Here we newly sequenced the genome of an exclusively aquatic ascomycete, Clavariopsis aquatica, documented the presence of genes for the modification of lignocellulose and its constituents, and compared differential gene expression between C. aquatica cultivated on lignocellulosic and sugar-rich substrates.We identified potential peroxidases, laccases, and cytochrome P450 monooxygenases several of which were differentially expressed when experimentally grown on different substrates. Additionally, we found regulation of pathways for cellulose and hemicellulose degradation. Our results suggest that C. aquatica is able to modify lignin, detoxify aromatic lignin constituents, or both. This may facilitate the use of carbohydrate components of lignocellulose as carbon and energy sources.