The degradation mechanisms of natural and artificial hydrazides have been elucidated. Here we screened and isolated bacteria that utilize the acylhydrazide 4-hydroxybenzoic acid 1-phenylethylidene hydrazide (HBPH) from soils. Physiological and phylogenetic studies identified one bacterium as Microbacterium sp. strain HM58-2, from which we purified intracellular hydrazidase, cloned its gene, and prepared recombinant hydrazidase using an Escherichia coli expression system. The Microbacterium sp. HM58-2 hydrazidase is a 631-amino-acid monomer that was 31% identical to indoleacetamide hydrolase isolated from Bradyrhizobium japonicum. Phylogenetic studies indicated that the Microbacterium sp. HM58-2 hydrazidase constitutes a novel hydrazidase group among amidase signature proteins that are distributed within proteobacteria, actinobacteria, and firmicutes. The hydrazidase stoichiometrically hydrolyzed the acylhydrazide residue of HBPH to the corresponding acid and hydrazine derivative. Steady-state kinetics showed that the enzyme hydrolyzes structurally related 4-hydrozybenzamide to hydroxybenzoic acid at a lower rate than HBPH, indicating that the hydrazidase prefers hydrazide to amide. The hydrazidase contains the catalytic Ser-Ser-Lys motif that is conserved among members of the amidase signature family; it shares a catalytic mechanism with amidases, according to mutagenesis findings, and another hydrazidase-specific mechanism must exist that compensates for the absence of the catalytic Ser residue. The finding that an environmental bacterium produces hydrazidase implies the existence of a novel bacterial mechanism of hydrazide degradation that impacts its ecological role.