The degradation dynamics of lignin and cellulose were analyzed by means of a solid state biodegradation experiment, using residues from the essential oil extraction of the Palo Santo tree (Bursera graveolens). As such, two native Xylaria spp. and an exotic mushroom Trametes versicolor were incubated on the spent substrate (Residues of B. Graveolens, BGR’s). The relatively high lignin and cellulose contents of the BGRs (9.1% and 19%, respectively) indicated the potential of this resource for the production of methane (biogas) and ethanol. However, the degradation of the lignin and cellulose content could be traced back to the relatively high activity of the enzymes laccase, cellulase, and xylanase, produced by the fungi. The results showed that laccase (30.0 U/L and 26.6 U/L), cellulase (27.3 U/L and 35.8 U/L) and xylanase (189.7U/L and 128.3 U/L) activities of Xylaria feejeensis and Xylaria cf. microceras were generally higher than T. versicolor (9.0 U/L, 29.5 U/L, 99.5 U/L respectively). Furthermore, the total carbon (TC: 47.3%), total nitrogen (TN: 1.5%), total phosphorus (TP: 0.2%) and total potassium (TK: 1.2%) dynamics were analyzed during the experiment and their importance for the degradation process highlighted. The results of this work might serve as guidance for future studies in dry forest areas, while furthering the understanding of the potential use of native fungi as ecologic lignocellulosic decomposers and for industrial proposes.