Neurospora crassa
colonizes burnt grasslands in the wild and metabolizes both cellulose and hemicellulose from plant cell walls. When switched from a favored carbon source such as sucrose to cellulose,
N. crassa
dramatically upregulates expression and secretion of a wide variety of genes encoding lignocellulolytic enzymes. However, the means by which
N. crassa
and other filamentous fungi sense the presence of cellulose in the environment remains unclear. Here, we show that an
N. crassa
mutant carrying deletions of two genes encoding extracellular β-glucosidase enzymes and one intracellular β-glucosidase lacks β-glucosidase activity, but efficiently induces cellulase gene expression in the presence of cellobiose, cellotriose, or cellotetraose as a sole carbon source. These data indicate that cellobiose, or a modified version of cellobiose, functions as an inducer of lignocellulolytic gene expression in
N. crassa
. Furthermore, the inclusion of a deletion of the catabolite repressor gene,
cre-1
, in the triple β-glucosidase mutant resulted in a strain that produces higher concentrations of secreted active cellulases on cellobiose. Thus, the ability to induce cellulase gene expression using a common and soluble carbon source simplifies enzyme production and characterization, which could be applied to other cellulolytic filamentous fungi.