Cranberry pomace contains large amounts of phenolic glycosides, which are important sources of free phenolics that have many food uses such as antioxidants, flavorings, and nutraceuticals. Our hypothesis was that these glycosides in cranberry pomace could be hydrolyzed by beta-glucosidase produced by Lentinus edodes during solid-state fermentation. On the basis of this hypothesis, our objective was to investigate the potential of using cranberry pomace as a substrate for the production of free phenolics and beta-glucosidase through solid-state fermentation by a food-grade fungus L. edodes. Our results suggested that L. edodes beta-glucosidase played a major role in release of phenolic aglycons from cranberry pomace during solid-state fermentation. After 50 days of cultivation, the yield of total free phenolics reached the maximum of 0.5 mg per g of pomace, while the beta-glucosidase activity was about 9 units per g of pomace. The enzyme exhibited optimal activity at 60 degrees C and at pH 3.5 and was stable at temperatures up to 50 degrees C and between pH 3 and 6.5. The major free phenolics produced from cranberry pomace were identified by HPLC as gallic acid, chlorogenic acid, p-hydroxybenzoic acid, and p-coumaric acid. These results suggest that cranberry pomace is a potential substrate for producing food-grade phenolics and fungal beta-glucosidase. The L. edodes beta-glucosidase showed good stability and tolerance to low pH and, therefore has potential applications in wine and juice processing for aroma and flavor enrichment through enzymatic hydrolysis of glucoside precursors.