Norway spruce (Picea abies) forests suffer periodic fatal attacks by the bark beetle Ips typographus and its fungal associate, Ceratocystis polonica. P. abies protects itself against fungal and bark beetle invasion by production of terpenoid resins and polyphenols. We investigated polyphenol biosynthesis in Norway spruce in response to infection by C. polonica and the effect of these compounds on in vitro growth of the fungus. During C. polonica infection, polyphenol biosynthesis was up-regulated as evidenced by elevated transcript levels of genes involved in their biosynthesis. However, polyphenol concentrations did not increase as dramatically a predicted by the gene expression data. This polyphenol decline during fungal infection was due to catabolism of these compounds by C. polonica. The fungus converted polyphenols to ring-opened, deglycosylated and dimeric products. Chromatographic separation of C. polonica protein extracts confirmed that these metabolites arose from specific fungal enzyme activities. Comparison of C. polonica strains showed that rapid conversion of host polyphenols is associated with higher virulence.