We report the isolation of mutant strains of the methylotrophic yeast Hansenula polymorpha that are able to efficiently oxidize ethanol to acetaldehyde in an intact cell system. The oxidation reaction is catalyzed by alcohol oxidase (AOX), a key enzyme in the methanol metabolic pathway that is typically present only in H. polymorpha cells growing on methanol. At least three mutations were introduced in the strains. Two of the mutations resulted Tn high levels of AOX in glucose-grown cells of the yeast. The third mutation introduced a defect in the cell＇s normal ability to degrade AOX in response to ethanol, and thus stabilizing the enzyme in the presence of this substrate. Using these strains, conditions for bioconversion of ethanol to acetaldehyde were examined. In addition to pH and buffer concentration, we found that the yield of acetaldehyde was improved by the addition of the proteinase inhibitor phenylmethylsulfonyl fluoride (PMSF) and by permeabilization of the cells with digitonin. Under optimal shake-flask conditions using one of the H. polymorpha mutant strains, conversion of ethanol to acetaldehyde was nearly quantitative. (C) 2000 John Wiley & Sons, Inc.