The ACO3 gene, which encodes one of the acyl-CoA oxidase isoenzymes, was isolated from the alkane-utilizing yeast Yarrowia lipolytica as a 10 kb genomic fragment. It was sequenced and found to encode a 701-amino acid protein very similar to other ACOs, 67·5% identical to Y. lipolytica Aco1p and about 40% identical to S. cerevisiae Pox1p. Haploid strains with a disrupted allele were able to grow on fatty acids. The levels of acyl-CoA oxidase activity in the ACO3 deleted strain, in an ACO1 deleted strain and in the wild-type strain, suggested that ACO3 encodes a short chain acyl-CoA oxidase isoenzyme. This narrow substrate spectrum was confirmed by expression of Aco3p in E. coli. © 1998 John Wiley & Sons, Ltd.