A new isolate, Gordonia sp. strain TY-5, is capable of growth on propane and n-alkanes with C(13) to C(22) carbon chains as the sole source of carbon. In whole-cell reactions, significant propane oxidation to 2-propanol was detected. A gene cluster designated prmABCD, which encodes the components of a putative dinuclear-iron-containing multicomponent monooxygenase, including the large and small subunits of the hydroxylase, an NADH-dependent acceptor oxidoreductase, and a coupling protein, was cloned and sequenced. A mutant with prmB disrupted (prmB::Kan(r)) lost the ability to grow on propane, and Northern blot analysis revealed that polycistronic transcription of the prm genes was induced during its growth on propane. These results indicate that the prmABCD gene products play an essential role in propane oxidation by the bacterium. Downstream of the prm genes, an open reading frame (adh1) encoding an NAD(+)-dependent secondary alcohol dehydrogenase was identified, and the protein was purified and characterized. The Northern blot analysis results and growth properties of a disrupted mutant (adh1::Kan(r)) indicate that Adh1 plays a major role in propane metabolism. Two additional NAD(+)-dependent secondary alcohol dehydrogenases (Adh2 and Adh3) were also found to be involved in 2-propanol oxidation. On the basis of these results, we conclude that Gordonia sp. strain TY-5 oxidizes propane by monooxygenase-mediated subterminal oxidation via 2-propanol.