The genes of nicotine dehydrogenase (NDH) were identified, cloned and sequenced from the catabolic plasmid pAO1 of Arthrobacter nicotinovorans. In immediate proximity to this gene cluster is the beginning of the 6-hydroxy-L-niotine oxidase (6-HLNO) gene. NDH is composed of three subunits (A, B and C) of M(r) 30,011, 14,924 and 87,677. It belongs to a family of bacterial hydroxylases with a similar subunit structure; they have molybdopterin dinucleotide, FAD and Fe-S clusters as cofactors. Here the first complete primary structure of a bacterial hydroxylase is provided. Sequence alignments of each of the NDH subunits show similarities to the sequences of eukaryotic xanthine dehydrogenase (XDH) but not to other known molybdenum-containing bacterial enzymes. Based on alignment with XDH it is inferred that the smallest subunit (NDHB) carries an iron-sulphur cluster, that the middle-sized subunit (NDHA) binds FAD, and that the largest NDH subunit (NDHC) corresponds to the molybdopterin-binding domain of XDH. Expression of both the ndh and the 6-hino genes required the presence of nicotine and molybdenum in the culture medium. Tungsten inhibited enzyme activity but not the synthesis of the enzyme protein. The enzyme was found in A. nicotinovorans cells in a soluble form and in a membrane-associated form. In the presence of tungsten the fraction of membrane-associated NDH increased.