A 3.7 kb DNA fragment of yeast chromosome IV has been sequenced that contains the SFA gene which, when present on a multi-copy plasmid in Saccharomyces cerevisiae, confers hyper-resistance to formaldehyde. The open reading frame of SFA is 1158 bp in size and encodes a polypeptide of 386 amino acids. The predicted protein shows strong homologies to several mammalian alcohol dehydrogenases and contains a sequence characteristic of binding sites for NAD. Overexpression of the SFA gene leads to enhanced consumption of formaldehyde, which is most probably the reason for the observed hyper-resistance phenotype. In sfa::LEU2 disruption mutants, sensitivity to formaldehyde is correlated with reduced degradation of the chemical. The SFA gene shares an 868 bp divergent promoter with UGX2 a gene of yet unknown function. Promoter deletion studies with a SFA promoter-lacZ gene fusion construct revealed negative interference on expression of SFA by upstream sequences. The upstream region between positions -145 and -172 is totally or partially responsible for control of inducibility of SFA by chemicals such as formaldehyde (FA), ethanol and methyl methanesulphonate. The 41 kDa SFA-encoded protein was purified from a hyper-resistant transformant; it oxidizes long-chain alcohols and, in the presence of glutathione, is able to oxidize FA. SFA is predicted to code for a long-chain alcohol dehydrogenase (glutathione-dependent formaldehyde dehydrogenase) of the yeast S. cerevisiae.