The aromatic polymer lignin protects plants from most forms of microbial attack. Despite the fact that a significant fraction of all lignocellulose degraded passes through arthropod guts, the fate of lignin in these systems is not known. Using tetramethylammonium hydroxide thermochemolysis, we show lignin degradation by two insect species, the Asian longhorned beetle (Anoplophora glabripennis) and the Pacific dampwood termite (Zootermopsis angusticollis). In both the beetle and termite, significant levels of propyl side-chain oxidation (depolymerization) and demethylation of ring methoxyl groups is detected; for the termite, ring hydroxylation is also observed. In addition, culture-independent fungal gut community analysis of A. glabripennis identified a single species of fungus in the Fusarium solani/Nectria haematococca species complex. This is a soft-rot fungus that may be contributing to wood degradation. These results transform our understanding of lignin degradation by wood-feeding insects.