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S-hydroxymethylglutathione dehydrogenase from Paecilomyces variotii No. 5 strain (NBRC 109023), isolated as a formaldehyde-degrading fungus, was purified by a procedure that included ammonium sulfate precipitation, DEAE-Sepharose and hydroxyapatite chromatography and isoelectrofocusing. Approximately 122-fold purification was achieved with a yield of 10.5%. The enzyme preparation was homogeneous as judged by sodium dodecyl polyacrylamide gel electrophoresis (SDS-PAGE). The molecular mass of the purified enzyme was estimated to be 49kDa by SDS-PAGE and gel filtration, suggesting that it is a monomer. Enzyme activity was optimal at pH 8.0 and was stable in the range of pH 7.0–10. The optimum temperature for activity was 40°C and the enzyme was stable up to 40°C. The isoelectric point was pH 5.8. Substrate specificity was very high for formaldehyde. Besides formaldehyde, the only aldehyde or alcohol tested that served as a substrate was pyruvaldehyde. Enzyme activity was enhanced by several divalent cations such as Mn2+ (179%), Ba2+ (132%), and Ca2+ (112%) but was completely inhibited by Ni2+, Fe3+, Hg2+, p-chloromercuribenzoate (PCMB) and cuprizone. Inactivation of the enzyme by sulfhydryl reagents (Hg2+ and PCMB) indicated that the sulfhydryl group of the enzyme is essential for catalytic activity.