AbstractA novel pathway for degradation of the cyanobacterial heptapeptide hepatotoxin microcystin LR was identified in a newly isolated Sphingomonas sp. (Bourne et al. 1996 Appl. Environ. Microbiol. 62: 4086–4094). We now report the cloning and molecular characterisation of four genes from this Sphingomonas sp. that exist on a 5.8‐kb genomic fragment and encode the three hydrolytic enzymes involved in this pathway together with a putative oligopeptide transporter. The heterologously expressed degradation pathway proteins are enzymatically active. Microcystinase (MlrA), the first enzyme in the degradative pathway, is a 336‐residue endopeptidase, which displays only low sequence identity with a hypothetical protein from Methanobacterium thermoautotrophicum. Inhibition of microcystinase by EDTA and 1,10‐phenanthroline suggests that it is a metalloenzyme. The most likely residues that could potentially chelate an active‐site transition metal ion are in the sequence HXXHXE, which would be unique for a metalloproteinase. Situated immediately downstream of mlrA with the same direction of transcription is a gene mlrD, whose conceptual translation (MlrD, 442 residues) shows significant sequence identity and similar potential transmembrane spanning regions to the PTR2 family of oligopeptide transporters. A gene mlrB is situated downstream of the mlrA and mlrD genes, but transcribed in the opposite direction. The gene encodes the enzyme MlrB (402 residues) which cleaves linear microcystin LR to a tetrapeptide degradation product. This enzyme belongs to the “penicillin‐binding enzyme” family of active site serine hydrolases. The final gene in the cluster mlrC, is located upstream of the mlrA gene and is transcribed in the opposite direction. It codes for MlrC (507 residues) which mediates further peptidolytic degradation of the tetrapeptide. This protein shows significant sequence identity to a hypothetical protein from Streptomyces coelicolor. It is suspected to be a metallopeptidase based on inhibition by metal chelators. It is postulated on the basis of comparison with other microorganisms that the genes in this cluster may all be involved in cell wall peptidoglycan cycling and subsequently act fortuitously in hydrolysis of microcystin LR. © 2001 John Wiley & Sons, Inc. Environ Toxicol, 16: 523–534, 2001