Arylalkylamine N-acetyltransferase (AANAT, serotonin N-acetyltransferase, EC ) plays a unique transduction role in vertebrate physiology by converting information about day and night into a hormonal signal: melatonin. Only vertebrate members of the AANAT family have been functionally characterized. Here a putative AANAT from Saccharomyces cerevisiae (scAANAT) was studied to determine whether it possessed the catalytic activity of the vertebrate enzyme. scAANAT is 47% similar to ovine AANAT, but lacks the regulatory N- and C-terminal flanking regions conserved in all vertebrate AANATs. It was found to have enzyme activity generally typical for AANAT family members, although the substrate preference pattern was somewhat broader, the specific activity was lower, and the pH optimum was higher. Deletion of scAANAT reduced arylalkylamine acetylation by S. cerevisiae extracts, indicating that scAANAT contributes significantly to this process. The scAANAT sequence conformed to the three-dimensional structure of ovine AANAT catalytic core; however, an important structural element (loop 1) was found to be shorter and to lack a proline involved in substrate binding. These differences could explain the lower specific activity of scAANAT, because of the importance of loop 1 in catalysis. Data base analysis revealed the presence of putative AANATs in other fungi but not in the nearly complete genomes of Drosophila melanogaster or Caenorhabditis elegans. These studies indicate that the catalytic and kinetic characteristics of fungal and vertebrate enzymes can be considered to be generally similar, although some differences exist that appear to be linked to changes in one structural element. Perhaps the most striking difference is that fungal AANATs lack the regulatory domains of the vertebrate enzyme, which appear to be essential for the regulatory role the enzyme plays in photochemical transduction.