Fungi cause serious problems in wood utilization, and environmentally benign wood protection is required as an alternative to traditional chemicals. Chitosan has shown promising antimicrobial properties against several microorganisms. In this study, we present the characterization of and antifungal properties of a commercial chitosan formulation developed for impregnation of wood. A broad range of chemical and mycological methods were used to evaluate the uptake, fixation, and antifungal properties of chitosan for wood preservation. The results show that the higher the uptake of chitosan the lower the relative recovery of chitosan in wood after leaching, and the higher the molecular weight of chitosan the higher the recovery. Chitosan with high molecular weight proved to be more efficient against decay fungi than chitosan with low molecular weight. The fungi tested on chitosan-amended nutrient agar medium were totally inhibited at 1% (w/v) concentration. In decay studies using small wood blocks, 4.8% (w/v) chitosan concentration gave the best protection against brown rot fungi.