Mechanical pulping process is electrical energy intensive and results in low paper strength. Biomechanical pulping, defined as the fungal treatment of lignocellulosic materials prior to mechanical pulping, has shown at least 30% savings in electrical energy consumption, and significant improvements in paper strength properties compared to the control at a laboratory scale. In an effort to scale-up biomechanical pulping to an industrial level, 50 tons of spruce wood chips were inoculated with the best biopulping fungus in a continuous operation and stored in the form of an outdoor chip pile for 2 weeks. The pile was ventilated with conditioned air to maintain the optimum growth temperature and moisture throughout the pile. The control and fungus-treated chips were refined through a thermomechanical pulp mill (TMP) producing lightweight coated paper. The fungal pretreatment saved 33% electrical energy and improved paper strength properties significantly compared to the control. Since biofibers were stronger than the conventional TMP fibers, we were able to reduce the amount of bleached softwood kraft pulp by at least 5% in the final product. Fungal pretreatment reduced brightness, but brightness was restored to the level of bleached control with 60% more hydrogen peroxide. The economics of biomechanical pulping look attractive.