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The epoxide hydrolase (EH)-encoding gene (EPH1) from the basidiomycetous yeast Xanthophyllomyces dendrorhous was isolated. The genomic sequence has a 1,236-bp open reading frame which is interrupted by eight introns that encode a 411-amino-acid polypeptide with a calculated molecular mass of 46.2 kDa. The amino acid sequence is similar to that of microsomal EH and belongs to the α/β hydrolase fold family. The EPH1 gene was not essential for growth of X. dendrorhous in rich medium under laboratory conditions. The Eph1-encoding cDNA was functionally expressed in Escherichia coli. A sixfold increase in specific activity was observed when we used resting cells rather thanX. dendrorhous. The epoxides 1,2-epoxyhexane and 1-methylcyclohexene oxide were substrates for both native and recombinant Eph1. Isolation and characterization of the X. dendrorhous EH-encoding gene are essential steps in developing a yeast EH-based epoxide biotransformation system.