The effect of temperature, pH, water potential and sources of nitrogen and carbon on the biocontrol agent Penicillium oxalicum were studied in vitro. The fungus is xerotolerant, mesophillic and has a wide pH tolerance. The parameters evaluated (germination, germ tube length, growth rate and sporulation) showed different sensitivities to the environmental factors. Peptone and free amino acids gave the highest growth rates and high levels of sporulation. Xylose, mannose and fructose gave the highest growth rates and mannose induced strong sporulation. The effect of nutrients (mannose + arginine) and water potential was also studied in vivo. The xerotolerant character of the fungus was confirmed. From this study we consider Penicillium oxalicum ecologically competent to perform effectively as a biocontrol agent in the soil environment.