Pleurotus ostreatus (the oyster mushroom) and other white rot filamentous basidiomycetes are key players in the global carbon cycle. P. ostreatus is also a commercially important edible fungus with medicinal properties and is important for biotechnological and environmental applications. Efficient gene targeting via homologous recombination (HR) is a fundamental tool for facilitating comprehensive gene function studies. Since the natural HR frequency in Pleurotus transformations is low (2.3%), transformed DNA is predominantly integrated ectopically. To overcome this limitation, a general gene targeting system was developed by producing a P. ostreatus PC9 homokaryon Δku80 strain, using carboxin resistance complemented by the development of a protocol for hygromycin B resistance protoplast-based DNA transformation and homokaryon isolation. The Δku80 strain exhibited exclusive (100%) HR in the integration of transforming DNA, providing a high efficiency of gene targeting. Furthermore, the Δku80 strains produced showed a phenotype similar to that of the wild-type PC9 strain, with similar growth fitness, ligninolytic functionality, and capability of mating with the incompatible strain PC15 to produce a dikaryon which retained its resistance to the corresponding selection and was capable of producing typical fruiting bodies. The applicability of this system is demonstrated by inactivation of the versatile peroxidase (VP) encoded by mnp4. This enzyme is part of the ligninolytic system of P. ostreatus, being one of the nine members of the manganese-peroxidase (MnP) gene family, and is the predominantly expressed VP in Mn(2+)-deficient media. mnp4 inactivation provided a direct proof that mnp4 encodes a key VP responsible for the Mn(2+)-dependent and Mn(2+)-independent peroxidase activity under Mn(2+)-deficient culture conditions.