Development of mycelial cord systems of Phanerochaete velutina (DC.: Pers.) Parmasto from 4-cm3 inocula on a nutrient-depleted non-sterile soil was studied in laboratory microcosms using image analysis techniques. Cord systems were ‘baited’ after 13 d growth with either fresh, non-sterile 4-cm3 wood baits or control Perspex® blocks of the same contact area placed behind the foraging mycelial front. After 26 d growth, mycelial ‘patches’ arose by dedifferentiation of consolidated mycelial cords in both wood- and Perspex-baited cord systems. ‘Patches’ comprised fine, highly branched separate hyphae extending radially from points of aggregated hyphae in cords. ‘Patches’ and cords could be readily distinguished by image analysis and the areas covered by patches and cords could be measured and compared. Whilst the total hyphal cover of Perspex- and wood-baited systems did not differ significantly (P>0·05), patch cover in wood-baited systems was up to 10 times greater than in Perspex-baited systems. Patches were temporary structures, regressing more rapidly with age than mycelial cords. Patch development ceased after application of a nutrient solution which replenished phosphate levels in the soil. Wood-baited mycelial systems displayed significant developmental polarity (P[les ]0·05) of both total hyphal cover (patches plus cords) and hyphae in patches towards the ‘baited’ sector of cord systems after 42 d, which corresponded with peak patch development. However, significant (P[les ]0·05) developmental polarity of the mycelial systems along the bait-inoculum line could be detected 8 d before patch formation when assessed by fractal geometry. Radiotracer studies showed that mycelial patches were not sinks for supplied 32P, but that they were sites of increased nutrient uptake capacity compared with that of mycelial cords. We discuss the need for mycelial cord systems to balance allocation of mycelial biomass between the two essential processes of colonizing wood resource units, and the acquisition of soluble inorganic nutrients from soil.