The biological and chemical basis of vanadium action and transport in fungi is relatively poorly understood. In this study we investigated the interactions of vanadium in physiologically-relevant redox states: vanadate (+5) and vanadyl (+4), with mycelium of fungus Phycomyces blakesleeanus using EPR and 31P NMR spectroscopy and biochemical assays. We determined that P. blakesleeanus reduces V5+ to V4+ in the extracellular compartment by the means of cell surface enzyme with ferricyanide reductase activity, which contains molybdenum–molybdopterin as a cofactor. Both, V5+ and V4+ bind to cell wall. They enter the cytoplasm via phosphate transporter and cation channels, respectively, and exhibit different metabolic effects. Vanadate provokes increased biomass production, the effects being inverted to toxic at higher V5+ concentrations. In addition, V5+ activates the synthesis of sugar phosphates and oligophosphates. On the other hand, V4+ exhibits toxic effects even at low concentrations. The V4+ detoxification route involves binding to vacuolar polyphosphates. Altogether our results imply that the mechanism of interaction of vanadium with P. blakesleeanus involves three major steps: extracellular enzymatic V5+/V4+ reduction, V4+ influx, and vacuolar storage, with an additional step – V5+ import occurring at higher vanadate concentrations.