The methylotrophic yeast, Hansenula polymorpha, harbours a unique catalase (EC 1.11.1.6), which is essential for growth on methanol as a carbon source and is located in peroxisomes. Its corresponding gene has been cloned and the nucleotide sequence determined. The deduced amino acid sequence displayed the tripeptide serine-lysine-isoleucine at the extreme C-terminus, which is similar to sequences of other peroxisomal targeting signals. Exchange of the ultimate amino acid, isoleucine, of catalase for serine revealed a cytosolic enzyme activity and a concomitant loss of peroxisome function. We concluded that the tripeptide is essential for targeting of catalase in H. polymorpha.