The invention is a method for making a fungal-resistant sheet of paper or paperboard for use in building materials. The method comprises adding a hydrophobic fungicide with a solubility in water of less that 0.3 g/L at 25.degree. C. to a paper slurry during manufacture of the paper or paperboard, and processing the paper slurry in a paper machine to create a sheet. Addition of a second process additive, especially a cationic fixative, synergistically improves the efficacy of the hydrophobic fungicide. A preferred fungicide is diiodomethyl-p-tolylsulfone.