Studies were begun to assess the significance and interrelationships of five fungi consistently associated with the deterioration of balsam fir trees killed by the spruce budworm, and to explain the succession pattern of the fungi in that process. A yeast and Ophiostoma bicolor Davidson and Wells were the only fungi consistently isolated from the discolored cambium of dying or recently killed trees; Stereum chailletii Pers. and an unidentified hyphomycete, Fungus F, were the principal fungi isolated from the stained sapwood of trees dead less than one year; and Polyporus abietinus Dicks, ex Fries was the only fungus consistently associated with the rotted sapwood of trees dead for more than one year. A gradual and fairly regular lowering of the moisture content, pH, and strength of balsam fir sapwood from the healthy, living state through the various stages of deterioration was recorded. There was no evidence of marked inhibition or antagonism among the fungi tested in pure culture. Although the most vigorous growth of P. abietinus occurred in liquid media adjusted at pH 4.5, compared with 6.5 for Fungus F and S. chailletii, balsam fir sticks of about pH 6.0 were readily infected by P. abietinus in the laboratory. Sticks artificially infected with S. chailletii or P. abietinus developed a pronounced reddish stain and showed significant reductions in toughness, and the pH of aqueous extracts of these sticks was markedly reduced. The same properties of sticks infected with Fungus F differed very little from those of the check sticks. There was no evidence that either Fungus F or S. chailletii was inhibited by the presence of the other in balsam fir sapwood, or that the presence of either had any effect upon the deteriorating capacity of P. abietinus. It is suggested that the principal explanation for the succession pattern of fungi in the deterioration of balsam fir lies in a dependence upon changes in certain properties of the wood substrate, particularly in the moisture content of the sapwood.