Prenyltransferases catalyse sequential condensations of isopentenyl diphosphate with allylic diphosphates. Previously, we reported the presence of farnesylgeranyl diphosphate (FGPP) synthase activity synthesizing C25 isoprenyl diphosphate in Natronobacterium pharaonis which is a haloalkaliphilic archaeon having C20-C25 diether lipids in addition to C20-C20 diether lipids commonly occurring in archaea [Tachibana, A. (1994) FEBS Lett. 341, 291-294]. Recently, it was found that a newly isolated aerobic hyperthermophilic archaeon, Aeropyrum pernix, had only C25-C25 diether lipids, not the usual C20-containing lipids [Morii, H., Yagi, H., Akutsu, H., Nomura, N., Sako, Y. & Koga, Y. (1999) Biochim. Biophys. Acta 1436, 426-436]. In this report, we describe the isoloation from A. pernix of the novel prenyltransferase gene, fgs, encoding FGPP synthase. The protein encoded by fgs was expressed in Escherichia coli as a glutathione S-transferase fusion protein and produced FGPP as a final product. Phylogenetic analysis of fgs with other prenyltransferases revealed that the short-chain prenyltransferase family is divided into three subfamilies: bacterial subfamily I, eukaryotic subfamily II, and archaeal subfamily III. fgs is clearly contained within the archaeal geranylgeranyl diphosphate (GGPP) synthase group (subfamily III), suggesting that FGPP synthase evolved from an archaeal GGPP synthase with an alteration in product specificity.