Cellulolytic microorganisms play an important role in the biosphere by recycling cellulose, the most abundant carbohydrate produced by plants. Cellulose is a simple polymer, but it forms insoluble, crystalline microfibrils, which are highly resistant to enzymatic hydrolysis. All organisms known to degrade cellulose efficiently produce a battery of enzymes with different specificities, which act together in synergism. The study of cellulolytic enzymes at the molecular level has revealed some of the features that contribute to their activity. In spite of a considerable diversity, sequence comparisons show that the catalytic cores of cellulases belong to a restricted number of families. Within each family, available data suggest that the various enzymes share a common folding pattern, the same catalytic residues, and the same reaction mechanism, i.e. either single substitution with inversion of configuration or double substitution resulting in retention of the beta-configuration at the anomeric carbon. An increasing number of three-dimensional structures is becoming available for cellulases and xylanases belonging to different families, which will provide paradigms for molecular modeling of related enzymes. In addition to catalytic domains, many cellulolytic enzymes contain domains not involved in catalysis, but participating in substrate binding, multi-enzyme complex formation, or possibly attachment to the cell surface. Presumably, these domains assist in the degradation of crystalline cellulose by preventing the enzymes from being washed off from the surface of the substrate, by focusing hydrolysis on restricted areas in which the substrate is synergistically destabilized by multiple cutting events, and by facilitating recovery of the soluble degradation products by the cellulolytic organism. In most cellulolytic organisms, cellulase synthesis is repressed in the presence of easily metabolized, soluble carbon sources and induced in the presence of cellulose. Induction of cellulases appears to be effected by soluble products generated from cellulose by cellulolytic enzymes synthesized constitutively at a low level. These products are presumably converted into true inducers by transglycosylation reactions. Several applications of cellulases or hemicellulases are being developed for textile, food, and paper pulp processing. These applications are based on the modification of cellulose and hemicellulose by partial hydrolysis. Total hydrolysis of cellulose into glucose, which could be fermented into ethanol, isopropanol or butanol, is not yet economically feasible. However, the need to reduce emissions of greenhouse gases provides an added incentive for the development of processes generating fuels from cellulose, a major renewable carbon source.