2,4,6-Trinitrophenol (picric acid) and 2,4-dinitrophenol were readily biodegraded by the strain Nocardioides simplex FJ2-1A. Aerobic bacterial degradation of these pi-electron-deficient aromatic compounds is initiated by hydrogenation at the aromatic ring. A two-component enzyme system was identified which catalyzes hydride transfer to picric acid and 2,4-dinitrophenol. Enzymatic activity was dependent on NADPH and coenzyme F420. The latter could be replaced by an authentic preparation of coenzyme F420 from Methanobacterium thermoautotrophicum. One of the protein components functions as a NADPH-dependent F420 reductase. A second component is a hydride transferase which transfers hydride from reduced coenzyme F420 to the aromatic system of the nitrophenols. The N-terminal sequence of the F420 reductase showed high homology with an F420-dependent NADP reductase found in archaea. In contrast, no N-terminal similarity to any known protein was found for the hydride-transferring enzyme.