Comamonas testosteroni T-2, grown in terephthalate (TER)-salts medium, synthesizes inducible enzymes that convert TER to (1R,2S)-dihydroxy-3,5-cyclohexadiene-1,4-dicarboxylic acid (DCD) and protocatechuate (PC). Anion-exchange chromatography of cell extracts yielded two sets of fractions, R and Z, that were necessary for oxygenation of TER to DCD; we termed this activity the TER dioxygenase system (TERDOS). An NAD(+)-dependent DCD dehydrogenase, which converted DCD to PC, overlapped all fractions R. No significant purification from fraction R, which contained an NADH-dependent reductase function(s) of TERDOS, was attained. Fraction Z, at the end of the gradient, contained essentially one protein, which was further purified by hydrophobic interaction chromatography. This component, Z, had the UV-visible spectrum and electron paramagnetic resonance characteristics of a Rieske [2Fe-2S] protein and was considered to be the oxygenase. M(r)s of about 126,000 for oxygenase Z under native conditions were observed. Oxygenase Z consisted of two subunits, alpha and beta, with M(r)s of 49,000 and 18,000, respectively, under denaturing conditions. We presume that this oxygenase has an alpha 2 beta 2 structure. The sequences of the N-terminal amino acids of each subunit were determined. The activity of the purified enzyme was enhanced about fivefold by addition of Fe2+. In the presence of O2, NADH, and fraction R, component Z catalyzed the stoichiometric transformation of TER to PC, with the intermediate formation of DCD. The reaction was confirmed as a dioxygenation when we observed incorporation of two oxygen atoms from 18O2 into PC. The substrate range of TERDOS appeared to be narrow; apart from TER, only 2,5-dicarboxypyridine and 1,4-dicarboxynaphthalene (of 11 compounds tested) were converted to a product.