The PUT1 gene of Saccharomyces cerevisiae, believed to encode proline oxidase, has been completely sequenced and contains an open reading frame capable of encoding a polypeptide of 476 amino acids in length. The amino terminus of the protein deduced from the DNA sequence has a characteristic mitochondrial import signal; two PUT1-lacZ gene fusions were constructed that produced mitochondrially localized beta-galactosidase in vivo. The transcription initiation and termination sites of the PUT1 mRNA were determined. By using a PUT1-lacZ gene fusion that makes a cytoplasmic beta-galactosidase, the regulation of the PUT1 gene was studied. PUT1 is inducible by proline, responds only slightly to carbon catabolite repression, and is not regulated by the cytochrome activator proteins HAP1 and HAP2. The PUT1 gene is under oxygen regulation; expression in anaerobically grown cells is 10-fold lower than in aerobically grown cells. Oxygen regulation is abolished when cells are respiratory deficient. PUT1 expression in a [rho-] strain grown either aerobically or anaerobically is as high as that seen in a [rho+] strain grown aerobically. Studies on PUT1 promoter deletions define a region between positions -458 and -293 from the translation initiation site that is important for full expression of the PUT1 gene and required for oxygen regulation.