Abstract Cellobiose dehydrogenase (CDH) can be used in industry for lactobionic acid production, as a part of biosensors for disaccharides and in wound healing. In fungi it is involved in lignocellulose degradation. CDH gene from Phanerochaete chrysosporium has been cloned in pYES2 plasmid for extracellular expression and protein engineering in yeast Saccharomyces cerevisiae InvSC1 for the first time. A CDH gene library was generated using error-prone PCR and screened by spectrophotometric enzymatic assay based on 2,6-dichloroindophenol reduction detection in microtiter plates. Several mutants with increased activity and specificity towards lactose and cellobiose were found, purified and characterized in detail. Recombinant CDH enzymes showed a broad molecular weight between 120 and 150 KDa due to hyper-glycosylation and the best S137 N mutant showed 2.2 times increased kcat and 1.5 and 2 times increased specificity constant for lactose and cellobiose compared to the wild type enzyme. pH optimum of mutants was not changed while thermostability of selected mutants improved and S137 N mutant retained 30% of it’s original activity after 15 min at 70 °C compared to 10% of activity that the wild type enzyme retained. Mutants M65S and S137 N showed also 1.6 and 1.5 times increased productivity of hydrogen peroxide in the presence of 30 mM lactose compared to the wild type.