The cell-free hltrate of a liquid culture of Al~reobasidil~77z pz~llz~lans (de Bary) ilrnaud contained a substance which stimulated the growth of Artnillaria lnellea (Fr.) Quel. 'l'his stimulatory effect was apparent when either rhizornorph tips or undifferentiated mycelium on water agar discs were used as inoculum, indicating an eifect 011 both rhizomorph initiation and elongation. The cell-free hltrate was shown by gas chro~natography to contain ethanol. Ethanol had an effect on the growth of 11. ?nellea similar to that of thc cell-free liltrate.Growth of A. n7ellen \vas stimulated by the presence of ethanol in the medium and the degree of stimulation was shown to be dependent on the total amount of ethanol available a t a concentration of 500 p.p.m. Ethanol added a t regular intervals as lower concentrations in the medium stimulated the growth of A.??zellen as much as orie higher initial concentration. A concentration of ethanol as low as 50 p.p.m. added daily for 14 days was more effective than an initial concentration of 700 p.p.m. in stimulating rhizomorph development of A. 7nellea.