The methylotrophic yeast Candida boidinii exhibits S-formylglutathione hydrolase activity (FGH, EC 3.1.2.12), which is involved in the glutathione-dependent formaldehyde oxidation pathway during growth on methanol as the sole carbon source. The structural gene, FGH1, was cloned from C. boidinii, and its predicted amino acid sequence showed more than 60 % similarity to those of FGHs from Paracoccus denitrificans and Saccharomyces cerevisiae, and human esterase D. FGH from C. boidinii contained a C-terminal tripeptide, SKL, which is a type I peroxisome-targeting signal, and a bimodal distribution of FGH between peroxisomes and the cytosol was demonstrated. The FGH1 gene was disrupted in the C. boidinii genome by one-step gene disruption. The fgh1Delta strain was still able to grow on methanol as a carbon source under methanol-limited chemostat conditions with low dilution rates (D<0.05 h(-1)), conditions under which a strain with disruption of the gene for formaldehyde dehydrogenase (another enzyme involved in the formaldehyde oxidation pathway) could not survive. These results suggested that FGH is not essential but necessary for optimal growth on methanol. This is believed to be the first report of detailed analyses of the FGH1 gene in a methylotrophic yeast strain.