The single enzyme that mediates the bioconversion is demonstrated to be located in the cells' periplasmic space, a site that facilitates its use as an industrial biocatalyst, and to be a previously undescribed hexosyltransferase with four novel features. The enzyme is sucrose-specific, and has an intramolecular mechanism in which both glucose and fructose residues appear to be enzyme-bound. Thirdly, it is reaction-non-selective, forming simultaneously isomaltulose and a second hitherto uncharacterized alpha-(1----1)-linked disaccharide (trehalulose), by hydrolysis of sucrose followed by reaction of glucose with the C-6 and C-1 positions of the fructofuranose respectively. Finally, on extended incubation an unusual recycling mechanism caused the concentration of isomaltulose, the kinetically preferred product, to reach a transient maximum concentration and then fall, and the concentration of trehalulose, the thermodynamically favoured product, to rise slowly.