To improve the stability and catalytic efficiency of pyranose 2-oxidase (P2Ox) by molecular enzyme evolution, we cloned P2Ox cDNA by RACE-PCR from a cDNA library derived from the basidiomycete Peniophora gigantea. The P2Ox gene was expressed in Escherichia coli BL21(DE3), yielding an intracellular and enzymatically active P2OxB with a volumetric yield of 500 units/l. Site-directed mutagenesis was employed to construct the P2Ox variant E540K (termed P2OxB1), which exhibited increased thermo- and pH-stability compared with the wild type, concomitantly with increased catalytic efficiencies (k(cat)/K(m)) for D-xylose and L-sorbose. P2OxB1 was provided with a C-terminal His(6)-tag (termed P2OxB1H) and subjected to directed evolution using error-prone PCR. Screening based on a chromogenic assay yielded the new P2Ox variant K312E (termed P2OxB2H) that showed significant improvements with respect to k(cat)/K(m) for D-glucose (5.3-fold), methyl-beta-D-glucoside (2.0-fold), D-galactose (4.8-fold), D-xylose (59.9-fold), and L-sorbose (69.0-fold), compared with wild-type P2Ox. The improved catalytic performance of P2OxB2H was demonstrated by bioconversions of L-sorbose that initially was a poor substrate for wild-type P2Ox. This is the first report on the improvement of a pyranose 2-oxidase by a dual approach of site-directed mutagenesis and directed evolution, and the application of the engineered P2Ox in bioconversions.