Laccases are copper-containing phenol oxidases that are commonly found in many types of plant, insect, fungi and bacteria. Whilst phenol oxidases have been well characterized in fungal species, laccase-type enzymes originating from bacteria have been much less well defined. Bacteria belonging to the family Azotobacteraceae share many morphological characteristics with strains already known to exhibit polyphenol and phenol oxidase activity; and hence the aim of this work was to identify and characterize a novel laccase from the isolated strain Azotobacter chroococcum SBUG 1484 in an attempt to provide further understanding of the roles such enzymes play in physiological development. Laccase activity was clearly observed through oxidation of 2,6-dimethoxyphenol, other typical substrates including: methoxy-monophenols, ortho- and para-diphenols, 4-hydroxyindole, and the non-phenolic compound para-phenylenediamine. A. chroococcum SBUG 1484 showed production of a cell-associated phenol oxidase when grown under nitrogen-fixing conditions, and was also observed when cells enter the melanogenic and encystment stages of growth. Catechol which is structurally related to melanin compounds was also released from Azotobacter cells into the surrounding culture medium during nitrogen-fixing growth. From our results we propose that a membrane-bound laccase plays an important role in the formation of melanin, which was monitored to correlate with progression of A. chroococcum SBUG 1484 cells into the encystment stage of growth.