Panus strigellus is a native basidiomycete from Brazil with laccase production potential. Laccases are involved in the biodegradation of dyes and their production can be stimulated by cultivation with agro industrial by-products. This study aimed to evaluate laccase production of P. strigellus cultivated with sugarcane bagasse on dye decolorization. Culture media had different concentrations of sugarcane bagasse (SB), sources of nitrogen (urea, yeast extract, ammonium sulfate and sodium nitrate), and concentrations of copper sulfate (0, 50, 100, 200, and 300 mu M). Enzymatic extract from fungal cultivation was used in the decolorization of reactive blue 220 (RB220), malachite green (MG), and remazol brilliant blue R (RBBR). Laccase production was inversely proportional to the amount of SB in cultivation medium and higher titers of enzyme were obtained when 20 g/L SB (SB20) was used. Cultivation medium with SB20 and most nitrogen sources did not have a positive effect on laccase production whereas the addition of urea or yeast-extract reduced laccase production. Most of the copper sulfate concentrations added to SB20 medium increased laccase production, and the maximum laccase production was 55,342 U/L in the SB20 medium with 200 mu M copper. The crude enzymatic extract was more effective in the decolorization of azo dye (RB220), with more than 90% of decolorization in 24 h, than anthraquinone dye (RBBR), with 60% decolorization, and triphenylmethane dye (MG), with 68% decolorization, both in 72 h.