The use of renewable biomass for production of heat and electricity plays an important role in the circular economy. Degradation of wood biomass to produce heat is a clean and novel process proposed as an alternative to wood burning, and could be used for various heating applications. So far, wood degradation has mostly been studied at ambient temperatures. However, the process needs to occur at elevated temperatures (40–55 °C) to produce useable heat. Our objective was to study wood degradation at elevated temperatures for its potential application on heat production. Two (a thermotolerant and a thermophilic) fungi with different degradation strategies were chosen: lignin-degrading Phanerochaete chrysosporium and cellulose-degrading Chaetomium thermophilum. Each fungus was inoculated on nonsterile and sterile birch woodblocks to, respectively, study their wood degradation activity with and without natural biota (i.e., microorganisms naturally present in wood). The highest wood decay rates were found with C. thermophilum in the presence of natural biota, followed by P. chrysosporium under sterile conditions. The estimated theoretical value of heat production with C. thermophilum under nonsterile conditions was 0.6 W kg–1 wood. In conclusion, C. thermophilum seems to be a promising fungus to degrade wood together with natural biota, as sterilization of wood is not feasible in practice. Further testing on a larger scale is needed to implement the obtained results and validate the potential of biological wood degradation for heat production.