Lignin utilization during biomass conversion has been a major challenge for lignocellulosic biofuel. In particular, the conversion of lignin along with carbohydrate for fungible fuels and chemicals will both improve the overall carbon efficiency and reduce the need for chemical pretreatments. However, few biomass-converting microorganisms have the capacity to degrade all cell wall components including lignin, cellulose, and hemicellulose. We hereby evaluated a unique oleaginous fungus strain, Cunninghamella echinulata FR3, for its capacity to degrade lignin during biomass conversion to lipid, and the potential to carry out consolidated fermentation without chemical pretreatment, especially when combined with sorghum (Sorghum bicolor) bmr mutants with reduced lignin content. The study clearly showed that lignin was consumed together with carbohydrate during biomass conversion for all sorghum samples, which indicates that this organism has the potential for biomass conversion without chemical pretreatment. Even though dilute acid pretreatment of biomass resulted in more weight loss during fungal fermentation than untreated biomass, the lipid yields were comparable for untreated bmr6/bmr12 double mutant and dilute acid-pretreated wild-type biomass samples. The mechanisms for lignin degradation in oleaginous fungi were further elucidated through transcriptomics and chemical analysis. The studies showed that in C. echinulata FR3, the Fenton reaction may play an important role in lignin degradation. This discovery is among the first to show that a mechanism for lignin degradation similar to those found in white and brown rot basidiomycetous fungi exists in an oleaginous fungus. This study suggests that oleaginous fungi such as C. echinulata FR3 can be employed for complete biomass utilization in a consolidated platform without chemical pretreatment or can be used to convert lignin waste into lipids