A new oxidative pathway for the degradation of caffeine(1,3,7-Trimethylxanthine, I) by a mixed culture consisting of strains belonging to the genera Klebsiella and Rhodococcus is presented. The mixed culture does not initiate degradation by N-demethylation either complete or partial, but instead carries out oxidation at the C-8 position resulting in the formation of 1,3,7-trimethyluric acid (TMU, II) which further gets degraded to 3,6,8-trimethylallantoin (TMA, III). Both TMU and TMA are hitherto not shown to be formed in the microbial system. Further degradation of TMA (III) by caffeine grown cells yields dimethylurea (VII) as one of the metabolites. Oxygen uptake studies indicated that caffeine(I) grown cells oxidized TMU(II), TMA (III), glyoxalic acid (VI), dimethylurea(VII), and monomethylurea(V), but not monomethyl and dimethyluric acids. The mixed culture does not accept theophylline(1,3-dimethylxanthine), theobromine(3,7-dimethylxanthine), and paraxanthine(1,7-dimethylxanthine) as the carbon source.