Poly(p-phenylene benzobisoxazole) (PBO) fiber has received great interest because of its excellent mechanical properties and good thermal stability. The objective of this study was to expose degradation mechanism of PBO under neutral and acidic conditions by molecular mass and Fourier transform infrared (FTIR) spectroscopy. Results were not consistent with the classic degradation mechanism, which indicates that degradation should occur through the ring opening and chain scission of the benzoxazole ring. The FTIR absorption spectra of PBO suggested that the o-hydroxy amide linkage (the open ring structure) was present in the PBO molecule chain to some extent because of the incomplete polymerization. Further investigation showed that hydrolysis might occur in the open ring section during hydrolytic degradation. Based on the experimental data, a new degradation mechanism was proposed. It suggests that, in the early and middle stages, hydrolysis occurred primarily in the o-hydroxy amide linkage of the open ring. The concentration of the o-hydroxy amide structure determined the speed of degradation of PBO.