The membrane-bound alcohol dehydrogenase (ADH) activity of Acetobacter pasteurianus NCI1380 was enhanced more than 10-fold by the addition of ethanol to the medium. In order to elucidate the mechanism of the ethanol induction, a gene cluster encoding the dehydrogenase and cytochrome c subunits of ADH was cloned from this strain, and its nucleotide sequence was determined. Comparison of the deduced amino acid sequences and the NH2-terminal sequences determined with purified proteins showed that the dehydrogenase and cytochrome c subunits contained typical signal peptides of 35 and 26 amino acids, respectively. Transcriptional analysis of the cloned genes by primer extension revealed that the gene cluster was transcribed from two different promoters upstream from the dehydrogenase gene. One (59 bp upstream of the ATG start codon) of the two promoters was used in the presence of ethanol, whereas the other (232 bp upstream of the ATG start codon) was used in the absence of ethanol. Immunoblot analyses showed that almost the same amounts of the cytochrome c and the 15-kDa subunits were produced in both the presence and absence of ethanol and that the amount of the dehydrogenase subunit localized in the membrane was decreased in the absence of ethanol. This incorrect localization of the dehydrogenase subunit might be one of the factors responsible for the low ADH activity in the absence of ethanol.