A gene (FDH1) of Candida maltosa which confers resistance to formaldehyde in Saccharomyces cerevisiae was cloned and its nucleotide sequence determined. The gene has a single intron which possesses the highly conserved splicing signals found in S. cerevisiae introns. We demonstrated that processing of the pre-mRNA of the cloned gene occurred identically in both S. cerevisiae and C. maltosa. The predicted amino acid sequence from the cloned gene showed 65.5% identity to human alcohol dehydrogenase (ADH) class III and 23.9% identity to S. cerevisiae ADH1. The most probable mechanism of resistance to formaldehyde is thought to be the glutathione-dependent oxidation of formaldehyde which is characteristic for ADH class III. The cloned FDH1 gene was successfully employed as a dominant selectable marker in the transformation of S. cerevisiae.