Ethane oxidation was studied in ethane-grown resting cells (mycelia) of an Acremonium sp. and in cell-free preparations of such mycelia. From resting cell experiments evidence was found for a pathway of ethane oxidation via ethanol, acetaldehyde, and acetic acid. In vitro studies indicated that ethane-oxidizing activity in such mycelia occurred predominantly in the microsomal fraction of crude homogenates. Microsomal preparations were inactive in the absence of added coenzyme. Marked stimulation of activity was obtained in such preparations with reduced nicotinamide adenine dinucleotide phosphate and to a much lesser degree with nicotinamide adenine dinucleotide phosphate. Ethane oxidation was inhibited by sodium azide and carbon monoxide.