A 29.5 kDa intracellular alpha-type carbonic anhydrase, designated Cah3, from the unicellular green alga Chlamydomonas reinhardtii is the first of this type discovered inside a photosynthetic eukaryote cell. We describe the cloning of a cDNA which encodes the protein. Immunoblot studies with specific antibodies raised against Cah3 demonstrate that the polypeptide is associated exclusively with the thylakoid membrane. The putative transit peptide suggests that Cah3 is directed to the thylakoid lumen, which is confirmed further by the presence of mature sized Cah3 after thermolysin treatment of intact thylakoids. Complementation of the high inorganic carbon concentration-requiring mutant, cia-3, with a subcloned cosmid containing the cah3 gene yielded transformants that grew on atmospheric levels of CO2 (0.035%) and contained an active 29.5 kDa alpha-type carbonic anhydrase. Although, cia-3 has reduced internal carbonic anhydrase activity, unexpectedly the level of Cah3 was similar to that of the wild-type, suggesting that the mutant accumulates an inactive Cah3 polypeptide. Genomic sequence analysis of the mutant revealed two amino acid changes in the transit peptide. Results from photosynthesis and chlorophyll a fluorescence parameter measurements show that the cia-3 mutant is photosynthetically impaired. Our results indicate that the carbonic anhydrase, extrinsically located within the chloroplast thylakoid lumen, is essential for growth of C.reinhardtii at ambient levels of CO2, and that at these CO2 concentrations the enzyme is required for optimal photosystem II photochemistry.