The purification and characterization of a novel extracellular beta-glucosidase from Paecilomyces thermophila J18 was studied. The beta-glucosidase was purified to 105-fold apparent homogeneity with a recovery yield of 21.7% by DEAE 52 and Sephacryl S-200 chromatographies. Its molecular masses were 116 and 197 kDa when detected by SDS-PAGE and gel filtration, respectively. It was a homodimeric glycoprotein with a carbohydrate content of 82.3%. The purified enzyme exhibited an optimal activity at 75 degrees C and pH 6.2. It was stable up to 65 degrees C and in the pH range of 5.0-8.5. The enzyme exhibited a broad substrate specificity and significantly hydrolyzed p-nitrophenyl-beta- d-glucopyranoside ( pNPG), cellobiose, gentiobiose, sophorose, amygdalin, salicin, daidzin, and genistin. Moreover, it displayed substantial activity on beta-glucans such as laminarin and lichenan, indicating that the enzyme has some exoglucanase activity. The rate of glucose released by the purified enzyme from cellooligosaccharides with a degree of polymerization (DP) ranging between 2 and 5 decreased with increasing chain length. Glucose and glucono-delta-lactone inhibited the beta-glucosidase competitively with Ki values of 73 and 0.49 mM, respectively. The beta-glucosidase hydrolyzed pNPG, cellobiose, gentiobiose, sophorose, salicin, and amygdalin, exhibiting apparent Km values of 0.26, 0.65, 0.77, 1.06, 1.39, and 1.45 mM, respectively. Besides, the enzyme showed transglycosylation activity, producing oligosaccharides with higher DP than the substrates when cellooligosaccharides were hydrolyzed. These properties make this beta-glucosidase useful for various biotechnological applications.