A gene encoding an esterase (estO) was identified and sequenced from a gene library screen of the psychrotolerant bacterium Pseudoalteromonas arctica. Analysis of the 1,203 bp coding region revealed that the deduced peptide sequence is composed of 400 amino acids with a predicted molecular mass of 44.1 kDa. EstO contains a N-terminal esterase domain and an additional OsmC domain at the C-terminus (osmotically induced family of proteins). The highly conserved five-residue motif typical for all alpha/beta hydrolases (G x S x G) was detected from position 104 to 108 together with a putative catalytic triad consisting of Ser(106), Asp(196), and His(225). Sequence comparison showed that EstO exhibits 90% amino acid identity with hypothetical proteins containing similar esterase and OsmC domains but only around 10% identity to the amino acid sequences of known esterases. EstO variants with and without the OsmC domain were produced and purified as His-tag fusion proteins in E. coli. EstO displayed an optimum pH of 7.5 and optimum temperature of 25 degrees C with more than 50% retained activity at the freezing point of water. The thermostability of EstO (50% activity after 5 h at 40 degrees C) dramatically increased in the truncated variant (50% activity after 2.5 h at 90 degrees C). Furthermore, the esterase displays broad substrate specificity for esters of short-chain fatty acids (C(2)-C(8)).