Azo dyes are regarded as pollutants because they are not readily reduced under aerobic conditions. Bacillus sp. OY1-2 transforms azo dyes into colorless compounds, and this reduction is mediated by a reductase activity for the azo group in the presence of NADPH. A 1.2-kbp EcoRI fragment containing the gene that encodes azoreductase was cloned by screening the genomic library of Bacillus sp. OY1-2 with digoxigenin-labeled probe designed from the N-terminal amino acid sequence of the purified enzyme. An open reading frame encoding the azoreductase, consisting of 178 amino acids, was predicted from the nucleotide sequence. In addition, because only a Bacillus subtillis hypothetical protein was discovered in the public databases (with an amino acid identity of 52.8%), the gene encoding the azoreductase cloned in this study was predicted to be a member of a novel family of reductases. Southern blot analysis revealed that the azoreductase gene exists as a single copy gene on a chromosome. Escherichia coli-expressing recombinant azoreductase gave a ten times greater reducing activity toward azo dyes than the original Bacillus sp. OY1-2. In addition, the expressed azoreductase purified from the recombinant E. coli lysate by Red-Sepharose affinity chromatography showed a similar activity and specificity as the native enzyme. This is the first report describing the sequencing and characterization of a gene encoding the azo dye-reducing enzyme, azoreductase, from aerobic bacteria and its expression in E. coli.