We have shown that many fungi (eukaryotes) exhibit distinct denitrifying activities, although occurrence of denitrification was previously thought to be restricted to bacteria (prokaryotes), and have characterized the fungal denitrification system. It comprises NirK (copper-containing nitrite reductase) and P450nor (a cytochrome P450 nitric oxide (NO) reductase (Nor)) to reduce nitrite to nitrous oxide (N(2)O). The system is localized in mitochondria functioning during anaerobic respiration. Some fungal systems further contain and use dissimilatory and assimilatory nitrate reductases to denitrify nitrate. Phylogenetic analysis of nirK genes showed that the fungal-denitrifying system has the same ancestor as the bacterial counterpart and suggested a possibility of its proto-mitochondrial origin. By contrast, fungi that have acquired a P450 from bacteria by horizontal transfer of the gene, modulated its function to give a Nor activity replacing the original Nor with P450nor. P450nor receives electrons directly from nicotinamide adenine dinucleotide to reduce NO to N(2)O. The mechanism of this unprecedented electron transfer has been extensively studied and thoroughly elucidated. Fungal denitrification is often accompanied by a unique phenomenon, co-denitrification, in which a hybrid N(2) or N(2)O species is formed upon the combination of nitrogen atoms of nitrite with a nitrogen donor (amines and imines). Possible involvement of NirK and P450nor is suggested.