Pseudoalteromonas sp. NO3 was isolated from the hemolymph of diseased sea squirts (Halocynthia rorentzi) with symptoms of soft tunic syndrome. The strain was found to produce an extracellular cellulase (CelY) that consisted of a 1,476 bp open reading frame encoding 491 amino acid residues with an approximate molecular mass of 52 kDa. Homologies of the deduced amino acid sequence of celY with the products of the celA, celX, celG and cel5Z genes were 92.6, 93.3, 92.6, and 59.1%, respectively. Additionally, CelY had 50-80% remnant catalytic activity at temperatures of 10-20 degrees C. Highest carboxymethyl cellulose (CMC) hydrolysis was observed at pH 8.0 and 40 degrees C. CMC activity was determined by zymogram active staining and different degraded product profiles for CelY were obtained when cellotetraose, cellopentaose, and CMC were used as substrates. This study identified a transglycosylation activity in CelY that allows the enzyme to digest G4 to G2 and G3 without the production of G1.