Cellobiose oxidase from the white rot fungus Phanerochaete chrysosporium has been purified to homogeneity by a new method. The enzyme has been cleaved by papain into two fragments: one containing the heme group and one containing the flavin group. The flavin fragment can oxidize cellobiose and is reoxidized by oxygen. Cellobiose oxidase binds to cellulose to approximately the same extent as cellobiohydrolase I. The cellulose-binding site is located on the flavin domain. The enzyme cannot be totally displaced from cellulose by cellobiose, and it is still active when adsorbed to cellulose. The possible role of the enzyme in lignocellulose degradation is discussed.