The 4-and 5-hydroxylations of phenolic compounds in plants are catalyzed by cytochrome P450 enzymes. The 3-hydroxylation step leading to the formation of caffeic acid from p-coumaric acid remained elusive, however, alternatively described as a phenol oxidase, a dioxygenase, or a P450 enzyme, with no decisive evidence for the involvement of any in the reaction in planta. In this study, we show that the gene encoding CYP98A3, which was the best possible P450 candidate for a 3-hydroxylase in the Arabidopsis genome, is highly expressed in inflorescence stems and wounded tissues. Recombinant CYP98A3 expressed in yeast did not metabolize free pcoumaric acid or its glucose or CoA esters, p-coumaraldehyde, or p-coumaryl alcohol, but very actively converted the 5-O-shikimate and 5-O-D-quinate esters of trans-p-coumaric acid into the corresponding caffeic acid conjugates. The shikimate ester was converted four times faster than the quinate derivative. Antibodies directed against recombinant CYP98A3 specifically revealed differentiating vascular tissues in stem and root. Taken together, these data show that CYP98A3 catalyzes the synthesis of chlorogenic acid and very likely also the 3-hydroxylation of lignin monomers. This hydroxylation occurs on depsides, the function of which was so far not understood, revealing an additional and unexpected level of networking in lignin biosynthesis.Systematic genome sequencing is revealing a large number of orphan genes and their phylogenetic relatedness to genes with characterized function. EST 1 sequences, on the other hand, are providing preliminary information on levels, patterns of expression, and conservation of genes among species. Taken together, such information can be exploited as a clue to gene function and to track down missing steps in important pathways.The sequencing of the whole genome of Arabidopsis thaliana has revealed 273 cytochrome P450 genes distributed into 45 families and subfamilies (drnelson.utmem.edu/CytochromeP450. html, www.biobase.dk/P450/). P450 proteins thus form the largest superfamily of enzymes involved in plant metabolism, but the function of 80% of these enzymes is still unknown. Our attention was first drawn to the CYP98 family by its phylogeny and structure. An analysis of P450 phylogeny in A. thaliana (Fig. 1) shows that the CYP98 family is most closely related to CYP73A5, coding for the cinnamic-acid 4-hydroxylase, the second enzyme and first P450 in the phenylpropanoid pathway (1). CYP73A5 and the CYP98 family seem to have evolved from the same ancestor as CYP79 enzymes, some of which also, in common with CYP73A5, use aromatic substrates derived from the shikimate pathway (2, 3). It was thus tempting to speculate that the substrate of CYP98 enzymes was derived from aromatic amino acids as well. The Arabidopsis CYP98 family is formed by only three genes. CYP98A3 is present in single copy; CYP98A8 and CYP98A9 are 69% identical to one another and only 52% identical to CYP98A3. All P450 genes in the phenylpropanoid pathway (CYP73A5, CYP84A1, and CYP...