A bacterium which degrades urethane compounds was isolated and identified as Rhodococcus equi strain TB-60. Strain TB-60 degraded toluene-2,4-dicarbamic acid dibutyl ester (TDCB) and accumulated toluene diamine as the degradation product. The enzyme which cleaves urethane bond in TDCB was strongly induced by acetanilide. The purified enzyme (urethane hydrolase) was found to be homogeneous on sodium dodecyl sulfate-polyacrylamide gel electrophoresis. The molecular weight was estimated to be 55 kDa. The optimal temperature and pH were 45 degrees C and 5.5, respectively. The enzyme hydrolyzed aliphatic urethane compound as well as aromatic ones. The activity was inhibited by HgCl2, p-chrolomercuribenzoic acid, and phenylmethylsulfonyl fluoride, suggesting that cysteine and/or serine residues play an important role in the activity. The enzyme catalyzed the hydrolysis of anilides, amides, and esters as well as TDCB. It was characterized as a novel amidase/esterase, differing in some properties from other known amidases/esterases.