An operon, bglABC, that encodes two sugar permeases and a beta -glucosidase was cloned from a cellulolytic actinomycete, Thermobifida fusca, into Escherichia coli and sequenced. The bglC gene encoding an intracellular beta -glucosidase (beta -D-glucoside glucohydrolase, EC 3.2.1.21) belonging to glycosyl hydrolase family 1 was subcloned and expressed in E. coli. The purified enzyme (MW 53,407 Da; pI 4.69) hydrolyzed substrates containing both beta 1 --> 4 and beta 1 --> 2 glycosidic bonds, and was most active against cellobiose (V-max = 29, K-m = 0.34 mM), cellotriose, cellotetraose, and sophorose. The enzyme also showed aryl-beta -glucosidase activity on p-nitrophenyl-beta -D-glucopyranoside and p-nitrophenyl-beta -D-cellobioside. BglC had a pH optimum of 7.0 and a temperature optimum of 50 degreesC. The enzyme was stable at 60 degreesC, but was rapidly inactivated at 65 degreesC. BglC was inhibited by low concentrations of gluconolactone, but was insensitive to end-product inhibition by glucose and was not affected by Ca or Mg ions or EDTA. Its properties are well suited for use in a process to hydrolyze biomass cellulose to glucose.