The appearance of wood substrates is likely relevant to bird species with life histories that require regular interactions with wood for food and shelter. Woodpeckers detect decayed wood for cavity placement or foraging, and some species may be capable of detecting trees decayed by specific fungi; however, a mechanism allowing for such specificity remains unidentified. We hypothesized that decay fungi associated with woodpecker cavity sites alter the substrate reflectance in a species-specific manner that is visually discriminable by woodpeckers. We grew 10 species of wood decay fungi from pure cultures on sterile wood substrates of 3 tree species. We then measured the relative reflectance spectra of decayed and control wood wafers and compared them using the receptor noise-limited (RNL) color discrimination model. The RNL model has been used in studies of feather coloration, egg shells, flowers, and fruit to model how the colors of objects appear to birds. Our analyses indicated 6 of 10 decayed substrate/control comparisons were above the threshold of discrimination (i.e., indicating differences discriminable by avian viewers), and 12 of 13 decayed substrate comparisons were also above threshold for a hypothetical woodpecker. We conclude that woodpeckers should be capable of visually detecting decayed wood on trees where bark is absent, and they should also be able to detect visually species-specific differences in wood substrates decayed by fungi used in this study. Our results provide evidence for a visual mechanism by which woodpeckers could identify and select substrates decayed by specific fungi, which has implications for understanding ecologically important woodpecker–fungus interactions.