Xylene monooxygenase of Pseudomonas putida mt-2 catalyzes the methylgroup hydroxylation of toluene and xylenes. To investigate the potential of xylene monooxygenase to catalyze multistep oxidations of one methyl group, we tested recombinant Escherichia coli expressing the monooxygenase genes xylM and xylA under the control of the alk regulatory system of Pseudomonas oleovorans Gpo1. Expression of xylene monooxygenase genes could efficiently be controlled by n-octane and dicyclopropylketone. Xylene monooxygenase was found to catalyze the oxygenation of toluene, pseudocumene, the corresponding alcohols, and the corresponding aldehydes. For all three transformations (18)O incorporation provided stong evidence for a monooxygenation type of reaction, with gem-diols as the most likely reaction intermediates during the oxygenation of benzyl alcohols to benzaldehydes. To investigate the role of benzyl alcohol dehydrogenase (XylB) in the formation of benzaldehydes, xylB was cloned behind and expressed in concert with xylMA. In comparison to E. coli expressing only xylMA, the presence of xylB lowered product formation rates and resulted in back formation of benzyl alcohol from benzaldehyde. In P. putida mt-2 XylB may prevent the formation of high concentrations of the particularly reactive benzaldehydes. In the case of high fluxes through the degradation pathways and low aldehyde concentrations, XylB may contribute to benzaldehyde formation via the energetically favorable dehydrogenation of benzyl alcohols. The results presented here characterize XylMA as an enzyme able to catalyze the multistep oxygenation of toluenes.