Cellobiose dehydrogenase (CDH) is an extracellular enzyme produced by various wood-degrading fungi. It oxidizes soluble cellodextrins, mannodextrins and lactose efficiently to their corresponding lactones by a ping-pong mechanism using a wide spectrum of electron acceptors including quinones, phenoxyradicals, Fe(3+), Cu(2+) and triiodide ion. Monosaccharides, maltose and molecular oxygen are poor substrates. CDH that adsorbs strongly and specifically to cellulose carries two prosthetic groups; namely, an FAD and a heme in two different domains that can be separated after limited proteolysis. The FAD-containing fragment carries all known catalytic and cellulose binding properties. One-electron acceptors, like ferricyanide, cytochrome c and phenoxy radicals, are, however, reduced more slowly by the FAD-fragment than by the intact enzyme, suggesting that the function of the heme group is to facilitate one-electron transfer. Non-heme forms of CDH have been found in the culture filtrate of some fungi (probably due to the action of fungal proteases) and were for a long time believed to represent a separate enzyme (cellobiose:quinone oxidoreductase, CBQ). The amino acid sequence of CDH has been determined and no significant homology with other proteins was detected for the heme domain. The FAD-domain sequence belongs to the GMC oxidoreductase family that includes, among others, Aspergillus niger glucose oxidase. The homology is most distinct in regions that correspond to the FAD-binding domain in glucose oxidase. A cellulose-binding domain of the fungal type is present in CDH from Myceliophtore thermophila (Sporotrichum thermophile), but in others an internal sequence rich in aromatic amino acid residues has been suggested to be responsible for the cellulose binding. The biological function of CDH is not fully understood, but recent results support a hydroxyl radical-generating mechanism whereby the radical can degrade and modify cellulose, hemicellulose and lignin. CDH has found technical use in highly selective amperometric biosensors and several other applications have been suggested.