The budding yeast Saccharomyces cerevisiae is a safe and widely used host for the production of recombinant DNA-derived proteins. We have used the signal sequence from the S. diastaticus STA2 gene, encoding glucoamylase II, to secrete Escherichia coli beta-galactosidase, encoded by the lacZ gene. In frame STA2/lacZ gene fusions have been constructed and expressed in S. cerevisiae under the control of either the STA2 or the galactose inducible GAL1-10 upstream promoters. Fairly high amounts of the enzyme (up to 76% of total activity, depending on the growth conditions) are secreted in the periplasmic space. Adding yeast extract and peptone to the growth medium results in a dramatic increase in both synthesis and secretion of beta-galactosidase.