Endophytic fungi were isolated/screened from temperate Taxus baccata (Yew) for production of the anti-cancer drug taxol. Of 242 endophytic fungi isolated from surface-sterilised Yew tree twig segments, only two produced taxol in a defined liquid medium; confirmed by HPLC and LC-MS/MS analyses. They were identified by molecular means by sequencing of ITS1/ITS2 regions and shown to be Paraconiothyrium variabile and Epicoccum nigrum. They produced 1.75 and 1.32 μgL−1 taxol respectively in a defined medium. Studies focussed on the P. variabile strain as it produced higher taxol amounts. Solute type (NaCl, KCl, Glucose, Glycerol, sorbitol), temperature (20, 25 and 30 oC) and water availability (water activity, aw; 0.90–0.99) on growth and taxol production by P. variabile was determined. Growth was similar on media with different solutes (1.0–1.25 mm d−1), optimum at 0.99 aw and 25 oC. In contrast, optimum taxol production was in a defined medium modified with KCl, at 0.98 aw and 20/25 oC, with approx. 2.3 and 7 μgL−1 respectively. No taxol was produced at <0.96 aw, at 25–30 oC, and <0.94 aw at 20 oC. This suggests that taxol producing endophytic fungi are in English yew trees and may have potential for utilisation as cell factories for production of this pharmaceutically useful compound.