The synthesis of plant growth hormone auxin, indole-3-acetic acid (IAA), is not only confined to flowering plants. Yeasts and other fungi are also known to produce this hormone and in many cases at higher levels than plants. The main concern of this study was to determine the physical and chemical conditions necessary for optimal biosynthesis of this hormone by Lentinus sajor-caju. Glucose was determined to be superior to sucrose as carbon and energy source. The synthesis of IAA in a nitrogen-free medium or in a medium with low external phosphate was substantially reduced. Light exposed and non-agitated cultures grown in dark had also reduced levels of IAA compared to agitated cultures grown in dark. The highest (0.18 mg ml−1) IAA level was determined in cultures grown in glucose containing medium (pH 7.5) on a rotary shaker (150 rpm) at 30 °C in dark. The biological activity of IAA obtained from the extra-cellular culture of Lentinus sajor-caju was determined using oat coleptile growth test.