The environmental fate of phenylurea herbicides has received considerable attention in recent decades. The microbial metabolism of N,N-dimethyl-substituted phenylurea herbicides can generally be initiated by mono-N-demethylation. In this study, the molecular basis for this process was revealed. The pdmAB genes in Sphingobium sp. strain YBL2 were shown to be responsible for the initial mono-N-demethylation of commonly used N,N-dimethyl-substituted phenylurea herbicides. PdmAB is the oxygenase component of a bacterial Rieske non-heme iron oxygenase (RO) system. The genes pdmAB, encoding the α subunit PdmA and the β subunit PdmB, are organized in a transposable element flanked by two direct repeats of an insertion element resembling ISRh1. Furthermore, this transposable element is highly conserved among phenylurea herbicide-degrading sphingomonads originating from different areas of the world. However, there was no evidence of a gene for an electron carrier (a ferredoxin or a reductase) located in the immediate vicinity of pdmAB. Without its cognate electron transport components, expression of PdmAB in Escherichia coli, Pseudomonas putida, and other sphingomonads resulted in a functional enzyme. Moreover, coexpression of a putative [3Fe-4S]-type ferredoxin from Sphingomonas sp. strain RW1 greatly enhanced the catalytic activity of PdmAB in E. coli. These data suggested that PdmAB has a low specificity for electron transport components and that its optimal ferredoxin may be the [3Fe-4S] type. PdmA exhibited low homology to the α subunits of previously characterized ROs (less than 37% identity) and did not cluster with the RO group involved in O- or N-demethylation reactions, indicating that PdmAB is a distinct bacterial RO N-demethylase.