A formulation of rigorous coupled-wave theory for diffraction gratings in bianisotropic media that exhibit linear birefringence and/or optical activity is presented. The symmetric constitutive relations for bianisotropic materials are adopted. All of the incident, exiting, and grating materials can be isotropic, uniaxial, or biaxial, with or without optical activity. The principal values of the electric permittivity tensor, the magnetic permeability tensor, and the gyrotropic tensor of the media can take arbitrary values, and the principal axes may be arbitrarily and independently oriented. Procedures for Fourier expansion of Maxwell's equations are described. Distinctive polarization coupling effects due to optical activity are observed in sample calculations.