An important problem during the production of cephalosporin C by Acremonium chrysogenum is the hydrolysis of cephalosporin C to deacetylcephalosporin C, since the latter compound has no commercial value and represents an unwanted side-product. Characterization of the enzymatic process that gives rise to deacetylcephalosporin C will help to avoid the accumulation of this side-product. An extracellular cephalosporin C acetylhydrolase (CPC-AH) from Acremonium chrysogenum C10 was purified to near homogeneity. This enzyme had a molecular mass of 31 kDa, a pl of 4.0, and showed relatively little affinity for cephalosporin C (K-m 33.7 mM). We sequenced twenty amino acids at the amino-terminal end; a probe based on this sequence was then used to clone the cephalosporin acetylhydrolase (cahB) gene. cahB encodes a pre-protein of 383 amino acids with a deduced molecular mass of 38,228 Da. The sequenced 20 amino acids of the purified protein corresponded to amino acids 107-127 deduced from the cahB gene, suggesting that mature CPC-AH results from processing of the pre-protein after Gln-106. cahB is located on chromosome VIII of A. chrysogenum C10 and is not linked to the cephalosporin early or late gene clusters. It is expressed as a single 1.4-kb transcript after 72 h of cultivation. Expression declined in batch cultures after 120 h even though CPC-AH activity was observed until 144 h. The CPC-AH protein resembles other wide-spectrum substrate fungal esterases that are functionally related to serine proteases. The cahB gene does not seem to be related to the cephalosporin biosynthesis genes and encodes an esterase active on several substrates in addition to cephalosporin C.