A gene has been cloned from Xanthophyllomyces dendrorhous by complementation of astaxanthin formation in a beta-carotene accumulating mutant. It consists of 3,166 bp and contains 17 introns. For the beta-carotene mutant ATCC 96815, a single point mutation in the splicing sequence of intron 8 was found. The resulting improper splicing of the mRNA results in an inactive protein. The cDNA of this beta-carotene oxygenase encodes a cytochrome P450 monooxygenase belonging to the 3A subfamily. P450-specific domains were identified including a cytochrome P450 and an oxygen binding motif. Electrons are provided by a cytochrome P450 reductase. Functional characterization of the enzyme by genetic modification of X. dendrorhous demonstrated that this P450 monooxygenase is multifunctional catalyzing all steps from beta-carotene to astaxanthin formation by oxygenation of carbon 3 and 4. The reaction sequence is first 4-ketolation of beta-carotene followed by 3-hydroxylation. A hydroxylation mechanism at allylic carbon atoms has been proposed for the generation of 4-keto and 3-hydroxy groups at both beta-ionone ends.