In this study, the occurrence and chromosomal clustering of genes encoding C 1 transfer reactions linked to tetrahydromethanopterin (H 4 MPT) were analyzed in a variety of proteobacteria and in representatives of the Planctomycetes via genomic analysis or via partial sequencing by cosmid walking. Although a tendency for clustering was found common for the genes of interest, significant variations in gene order and the degree of clustering were uncovered both between and within different groups of Proteobacteria and between Proteobacteria and Planctomycetes. Phylogenetic analyses suggested that the evolution of genes encoding H 4 MPT-linked reactions in Proteobacteria involved lateral transfers within Proteobacteria and possibly between Proteobacteria and other phyla. Gene cluster comparisons revealed a number of novel genes potentially involved in the C 1 transfer reactions, and these were analyzed by mutation and expression analyses. Four genes, a homolog of pabB, and three genes conserved between methanogenic Archaea and Bacteria possessing H 4 MPT-linked functions, orfY, orf1, and afpA were shown to be involved in formaldehyde oxidation/detoxification, as judged by specific mutant phenotypes. In particular, pabB contributes to the biosynthesis of para-aminobenzoic acid, a precursor of both tetrahydrofolate and H 4 MPT, and afpA apparently encodes a novel dihydromethanopterin reductase, based on mutant complementation experiments.One of the major breakthroughs in the understanding of methylotrophy in Bacteria during the recent decade, the recognition of the tetrahydromethanopterin (H 4 MPT)-linked pathway for formaldehyde oxidation as a major C 1 oxidation pathway, was due to a serendipitous discovery of a cluster of genes in Methylobacterium extorquens AM1 that are homologous to the genes involved in methanogenesis in Archaea (7). It has since been demonstrated that this pathway is nearly ubiquitous in gram-negative methylotrophs (26). More recently, the pathway's presence has been expanded beyond methylotrophs (20), and even beyond Proteobacteria into the Planctomycetes (5, 10). Although phylogenetic analysis has argued against recent lateral transfer of the genes in question between methanogenic Archaea and Proteobacteria (5), the history of these genes in Bacteria remains poorly understood. Although some congruence has been observed between the phylogenetic positions of the respective species within Proteobacteria and phylogenies of genes involved in H 4 MPT-linked reactions (13, 15), the relationships of the latter are not always well resolved and sometimes are complicated by the presence of multiple gene copies. In the present study we attempted a more comprehensive analysis of gene islands in Bacteria involved in H 4 MPTlinked C 1 transfers via analysis of available genomic sequences, via expanding gene databases by cosmid walking, and via mutagenesis and phylogenetic analysis. The following major objectives were pursued: (i) to determine whether gene clustering patterns are conserved within specific gr...