The versatile-peroxidase (VP) encoded by mnp4 is one of the nine members of the manganese-peroxidase (MnP) gene family that constitutes part of the ligninolytic system of the white-rot basidiomycete Pleurotus ostreatus (oyster mushroom). VP enzymes exhibit dual activity on a wide range of substrates. As Mn2+ supplement to P. ostreatus cultures results in enhanced degradation of recalcitrant compounds and lignin, we examined the effect of Mn2+ on the expression profile of the MnP gene family. In P. ostreatus (monokaryon PC9), mnp4 was found to be the predominantly expressed mnp in Mn2+-deficient media, whereas strongly repressed (to approximately 1%) in Mn2+-supplemented media. Accordingly, in-vitro Mn2+-independent activity was found to be negligible. We tested whether release of mnp4 from Mn2+ repression alters the activity of the ligninolytic system. A transformant over-expressing mnp4 (designated OEmnp4) under the control of the β-tubulin promoter was produced. Now, despite the presence of Mn2+ in the medium, OEmnp4 produced mnp4 transcript as well as VP activity as early as 4 days after inoculation. The level of expression was constant throughout 10 days of incubation (about 0.4-fold relative to β-tubulin) and the activity was comparable to the typical activity of PC9 in Mn2+-deficient media. In-vivo decolorization of the azo dyes Orange II, Reactive Black 5, and Amaranth by OEmnp4 preceded that of PC9. OEmnp4 and PC9 were grown for 2 weeks under solid-state fermentation conditions on cotton stalks as a lignocellulosic substrate. [14C]-lignin mineralization, in-vitro dry matter digestibility, and neutral detergent fiber digestibility were found to be significantly higher (about 25%) in OEmnp4-fermented substrate, relative to PC9. We conclude that releasing Mn2+ suppression of VP4 by over-expression of the mnp4 gene in P. ostreatus improved its ligninolytic functionality.