A yeast isolate revealing unique enzymatic activities and substrate-dependent polymorphism was obtained from autochthonous microflora of soil heavily polluted with oily slurries. By means of standard yeast identification procedures the strain was identified as Trichosporon cutaneum. Further molecular PCR product analyses of ribosomal DNA confirmed the identity of the isolate with the genus Trichosporon. As it grew on methanol as a sole carbon source, the strain appeared to be methylotrophic. Furthermore, it was also able to utilize formaldehyde. A multi-substrate growth potential was shown with several other carbon sources: glucose, glycerol, ethanol as well as petroleum derivatives and phenol. Optimum growth temperature was determined at 25 degrees C, and strong inhibition of growth at 37 degrees C together with the original soil habitat indicated lack of pathogenicity in warm-blooded animals and humans. The unusually high tolerance to xenobiotics such as diesel oil (>30 g/l), methanol (50 g/l), phenol (2 g/l) and formaldehyde (7.5 g/l) proved that the isolate was an extremophilic organism. With high-density cultures, formaldehyde was totally removed at initial concentrations up to 7.5 g/l within 24 h, which is the highest biodegradation capability ever reported. Partial biodegradation of methanol (13 g/l) and diesel fuel (20 g/l) was also observed. Enzymatic studies revealed atypical methylotrophic pathway reactions, lacking alcohol oxidase, as compared with the conventional methylotroph Hansenula polymorpha. However, the activities of glutathione-dependent formaldehyde dehydrogenase, formaldehyde reductase, formate dehydrogenase and unspecific aldehyde dehydrogenase(s) were present. An additional glutathione-dependent aldehyde dehydrogenase activity was also detected. Metabolic and biochemical characteristics of the isolated yeast open up new possibilities for environmental biotechnology. Some potential applications in soil bioremediation and wastewater decontamination are discussed.