A basidiomycete fungus was found growing on rotting Pinus ponderosa wood near Pagosa Springs, Colorado. This fungus produces large masses of calcium oxalate crystals in association with the hyphae. The calcium oxalate deposits take the form of druses, multiple crystal aggregates. Examination of the hyphae and druses by transmission electron microscopy shows that a crystal sheath covers the individual crystals. The crystal sheath is continuous with the external part of the hyphal cell wall, and zones of the wall, just below the druses, are substantially thinner than the adjacent cell wall. Results of this research support the hypothesis that crystals are produced by the hyphae and do not support the idea that the crystals are precipitated on the hyphal surface.