Xylose reductase (XR) is a key enzyme in D-xylose metabolism, catalyzing the reduction of D-xylose to xylitol. An NADH-preferring XR was purified to homogeneity from Candida parapsilosis KFCC-10875, and the xyl1 gene encoding a 324-amino-acid polypeptide with a molecular mass of 36,629 Da was subsequently isolated using internal amino acid sequences and 5' and 3' rapid amplification of cDNA ends. The C. parapsilosis XR showed high catalytic efficiency (kcat/Km = 1.46 s(-1) mM(-1)) for D-xylose and showed unusual coenzyme specificity, with greater catalytic efficiency with NADH (kcat/Km = 1.39 x 10(4) s(-1) mM(-1)) than with NADPH (kcat/Km = 1.27 x 10(2) s(-1) mM(-1)), unlike all other aldose reductases characterized. Studies of initial velocity and product inhibition suggest that the reaction proceeds via a sequentially ordered Bi Bi mechanism, which is typical of XRs. Candida tropicalis KFCC-10960 has been reported to have the highest xylitol production yield and rate. It has been suggested, however, that NADPH-dependent XRs, including the XR of C. tropicalis, are limited by the coenzyme availability and thus limit the production of xylitol. The C. parapsilosis xyl1 gene was placed under the control of an alcohol dehydrogenase promoter and integrated into the genome of C. tropicalis. The resulting recombinant yeast, C. tropicalis BN-1, showed higher yield and productivity (by 5 and 25%, respectively) than the wild strain and lower production of by-products, thus facilitating the purification process. The XRs partially purified from C. tropicalis BN-1 exhibited dual coenzyme specificity for both NADH and NADPH, indicating the functional expression of the C. parapsilosis xyl1 gene in C. tropicalis BN-1. This is the first report of the cloning of an xyl1 gene encoding an NADH-preferring XR and its functional expression in C. tropicalis, a yeast currently used for industrial production of xylitol.