A xylose reductase gene (xyl1) of Candida guilliermondii ATCC 20118 was cloned and characterized. The open reading frame of xyl1 contained 954 nucleotides encoding a protein of 317 amino acids with a predicted molecular mass of 36 kDa. The derived amino acid sequence of C. guilliermondii xylose reductase was 70.4% homologous to that of Pichia stipitis. The gene was placed under the control of an alcohol oxidase promoter (AOX1) and integrated into the genome of a methylotrophic yeast. Pichia pastoris. Methanol induced the expression of the 36-kDa xylose reductase in both intracellular and secreted expression systems. The expressed enzyme preferentially utilized NADPH as a cofactor and was functional both in vitro and in vivo. The different cofactor specificity between P. pastoris and C. guilliermondii xylose reductases might be due to the difference in the numbers of histidine residues and their locations between the two proteins. The recombinant was able to ferment xylose, and the maximum xylitol accumulation (7.8 g/l) was observed when the organism was grown under aerobic conditions.