Type and extent of biodeterioration occurring on eastern spruce trees, Picea spp., infested by spruce budworm Choristoneura fumiferana (Clem.), and its effect on the value of timber as raw material for lumber and compoition board production was investigated in New Brunswick and Nova Scotia. Moderately defoliated, severely defoliated and dead (standing) trees were examined and compared with normal trees. The results indicated that the loss in wood quality due to fungal decay and insect damage on defoliated trees was not substantial and could be ignored in the use of the wood as raw material for the products mentioned above. Dead trees were found to be deteriorated to a considerable extent, mainly as a result of fungal decay, especially on the butt ends, and contained moisture in most parts to a level considered favorable for fungal decay. Decay and insect damage present on dead trees did not affect the lumber processing rate. Lower lumber recovery, however, and especially downgrading, resulted in a 21% loss of the value of lumber recovered. Particle boards and waferboards produced from the roundwood from dead trees (6-foot bolts, 7 to 13 feet from the ground) were excellent in quality and equal to those produced from unattacked or defoliated trees. A storage study was initiated near Fredericton, N.B. Six-foot long bolts from dead, defoliated and normal trees, with and without bark, will be monitored and examined for the rate and causes of deterioration during storage.