We selected for spore-forming psychrophilic bacteria able to use lactose as a carbon source and one isolate, designated Paenibacillus sp. strain C7, that was phylogenetically related to, but distinct from both Paenibacillus macquariensis and Paenibacillus antarcticus. Some Escherichia coli transformants obtained with genomic DNA from this isolate hydrolyzed X-Gal (5-bromo-4-chloro-3-indoyl--D-galactopyranoside) only below 30°C, an indication of cold-active -galactosidase activity. Sequencing of the cloned insert revealed an open reading frame encoding a 756-amino acid protein that, rather than belonging to a family typically known for -galactosidase activity, belonged to glycoside hydrolase family 3, a family of -glucosidases. Because of this unusual placement, the recombinant enzyme (BglY) was purified and characterized. Consistent with its classification, the enzyme had seven times greater activity with the glucoside substrate ONPGlu (o-nitrophenyl--D-glucopyranoside) than with the galactoside substrate ONPGal (o-nitrophenyl--D-galactopyranoside). In addition, the enzyme had, with ONPGlu, a thermal optimum around 30 to 35°C, activity over a broad pH range (5.5 to 10.9), and an especially low K m (<0.003 mM). Further examination of substrate preference showed that the BglY enzyme also hydrolyzed other aryl--glucosides such as helicin, MUG (4-methylumbelliferyl--D-glucopyranoside), esculin, indoxyl--D-glucoside (a natural indigo precursor), and salicin, but had no activity with glucosidic disaccharides or lactose. These characteristics and substrate preferences make the BglY enzyme unique among the family 3 -glucosidases. The hydrolysis of a variety of aryl--glucosides suggests that the enzyme may allow the organism to use these substrates in the environment and that its low K m on indoxyl--D-glucoside may make it useful for producing indigo.Glycoside hydrolases cleave the bond between two carbohydrates or a carbohydrate moiety and another molecule. The classic Enzyme Classification System (EC) groups glycoside hydrolases by substrate specificity; for instance, the -glucosidases collectively have the designation EC 3.2.1.21. The EC system does not use structural or evolutionary information and is thus less useful for categorizing enzymes when the substrate preferences are not known. Therefore, Henrissat (18) initiated a classification system based on amino acid sequences, hydrophobicity plots, and reaction mechanisms. Under this system, -glucosidases are grouped in two glycoside hydrolase families (GHFs), 1 and 3, and the -galactosidases (EC 3.2.1.23) in four families, 1, 2, 35, and 42. Although this system illustrates enzyme relationships, it does not indicate the natural substrate or function of the enzyme. For example, some GHF 1 -glucosidases possess significant -galactosidase activity (5) and the physiological functions of many of these are unknown.The need for biochemical and physiological studies of microbial glycoside hydrolases is highlighted by the prevalence of open reading frames (OR...