Resistance to fusidic acid in Streptomyces lividans is due to secretion of an extracellular enzyme (FusH) that converts the steroid antibiotic into an inactive derivative. NH2-terminal and several internal amino acid sequences were prepared from the purified enzyme. Using one of the deduced oligonucleotides to probe a subgenomic DNA library, the fusH gene was cloned and sequenced. Sequence analysis located an ORF which, owing to the presence of two putative start codons, indicates a predicted protein with 520 or 509 amino acids. A signal peptide was identified by aligning the deduced amino acids with the N-terminal sequence determined for the mature enzyme. The C-terminal part of the deduced FusH contains a region of three tandemly repeated stretches of 50 amino acids, which is preceded and followed by amino acids showing high homology with the repeats. FusH was found to share a GDS motif with some deduced esterases. S. lividans transformants carrying fusH on a multicopy vector synthesized high levels of FusH. Purified FusH cleaved equally well an acetyl, a thioacetyl or a formyl group from the 16 beta-position of fusidic acid and its derivatives. However, a propionyl group at the 16 beta-position was attacked with difficulty and a 16 alpha-acetyl group was not hydrolysed at all. These data indicate that FusH is a highly specific esterase. The fusH gene is widely distributed among streptomycetes that modify fusidic acid to its inactive lactone derivative.