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.