The degradation of phenylacetate (PA) was investigated as a model to explore aromatic compound breakdown in the fungal system. Fungal strains capable of utilizing PA as their sole carbon source were isolated using a minimal solid medium supplemented with 0.5 % PA. Subsequent cultivation in minimum liquid medium revealed that selected fungal strains, including Trametes versicolor TV0876 and TV3295, Paecilomyces hepiali PH4477, and Akanthomyces muscarius AM1091, efficiently removed PA within 24 h. HPLC analysis of culture supernatants from various fungal strains revealed a time-dependent accumulation of 2-hydroxyphenylacetate (2-HPA) and 4-hydroxyphenylacetate (4-HPA), two key major metabolic products primarily found in ascomycetes and basidiomycetes, respectively. This suggests that the first hydroxylation of PA is catalyzed by two distinct hydroxylases, one for each fungal group. Furthermore, fungal species that make 4-HPA also produce phenylethanol (PE), indicating a distinct catabolic mechanism to remove PA by direct reduction of PA to PE. A. muscarius AM1091, identified as the most efficient PA degrader in this study, was studied further to determine the biochemical pathway of PA degradation. RNA-Seq and RT-PCR analyses of AM1091 revealed two oxidative enzyme genes, CYP1 and DIO4, upregulated in the presence of PA. Targeted disruption utilizing preassembled Cas9-gRNA ribonucleoprotein complexes and homologous DNAs harboring the URA3 gene as an auxotrophic marker resulted in the cyp1 and dio4 mutant strains. The cyp1 mutant was incapable of converting PA to 2-HPA, indicating its involvement in the C2 hydroxylation, whereas the dio4 mutant was unable to degrade 2,5-dihydroxyphenylacetate (2,5-DHPA), resulting in the accumulation of 2,5-DHPA. Our findings indicate that A. muscarius AM1091 degrades PA through the activities of CYP1 and DIO4 for the C2 hydroxylation and subsequent ring-opening reactions, respectively.