The gene encoding an intracellular enzyme hydrolyzing di-D-fructofuranose 1,2': 2,3' dianhydride (DFA III) (DFA IIIase) was cloned from the genomic DNA of Arthrobacter sp. H65-7 for the first time. The single open reading frame (ORF) of the DFA IIIase gene consisted of 1368-bp encoding 455 amino acids. DFA IIIase showed a phylogenetically distinct position from other inulin-degrading enzymes and showed similarity only with inulin fructotransferases (depolymerizing) (inulase II, EC 2.4.1.93) from Arthrobacter globiformis C11-1, Arthrobacter sp. A-6, and Arthrobacter sp. H65-7 (48.7-50.3%), and inulin fructotransferase (DFA I-producing) (EC 2.4.1.200) from A. globiformis S14-3 (44.4%). An Escherichia coli transformant harboring a recombinant plasmid, pINB2, in which the DFA IIIase gene was fused with the P-galactosidase of pUC19 and under the control of the lac promoter, expressed DFA IIIase and the cloned enzyme produced inulobiose from DFA III similarly to the DFA IIIase of the wild-type strain, Arthrobacter sp. H65-7.