A 4-nitrophenol (4-NP)-degrading bacterium was isolated from activated sludge and identified as a Rhodococcus sp. This bacterium, designated as strain PN1, could utilize 4-NP as a sole carbon, nitrogen and energy source. Degradation tests of 4-NP using cell suspensions of strain PN1 revealed that the degradation was induced by 4-NP and that 4-nitrocatechol (4-NC) was one of the metabolites. A gene library was constructed from the total DNA of strain PN1 and introduced into Rhodococcus rhodochrous ATCC 12674. Two recombinant strains showed 4-NP hydroxylase activity, and a 9.1-kb DNA fragment encoding the activity was isolated from one of the strains. In addition, a 2.4-kb smaller fragment expressing the activity was subcloned from the 9.1-kb fragment and sequenced. The sequence analysis showed that the fragment encodes a two-component 4-NP hydroxylase, the predicted amino acid sequence of which exhibits significant similarity to those of phenol hydroxylases and 4-hydroxyphenylacetate 3-hydroxylases belonging to the two-component flavin diffusible monooxygenase (TC-FDM) family proposed by Galan et al. (J. Bacteriol., 182, 627-636, 2000).