An extracellular lignin-degrading enzyme from the basidiomycete Phanerochaete chrysosporium Burdsall was purified to homogeneity by ion-exchange chromatography. The 42,000-dalton ligninase contains one protoheme IX per molecule. It catalyzes, nonstereospecifically, several oxidations in the alkyl side chains of lignin-related compounds: C(alpha)-C(beta) cleavage in lignin-related compounds of the type aryl-C(alpha)HOH-C(beta)HR-C(gamma)H(2)OH (R = -aryl or -O-aryl), oxidation of benzyl alcohols to aldehydes or ketones, intradiol cleavage in phenylglycol structures, and hydroxylation of benzylic methylene groups. It also catalyzes oxidative coupling of phenols, perhaps explaining the long-recognized association between phenol oxidation and lignin degradation. All reactions require H(2)O(2). The C(alpha)-C(beta) cleavage and methylene hydroxylation reactions involve substrate oxygenation; the oxygen atom is from O(2) and not H(2)O(2). Thus the enzyme is an oxygenase, unique in its requirement for H(2)O(2).