1,4-beta-D-Xylanase (1,4-beta-D-xylan xylanohydrolase; EC 3.2.1.8) has been detected in both cell-free extracts and culture fluids of the yeast Cryptococcus albidus var. aerius grown on glucose as the only carbon source. Mild acid treatment of whole cells proved that the enzyme was extracellularly located. The activity remained almost completely linked to the wall after cell breakage, only being liberated in the presence of salt at high concentration. After release, the enzyme became very unstable and so has been characterized in situ in 'permeabilized' cells. The maximum production took place at the beginning of the exponential growth phase. The optimum pH and temperature for activity were 5.0 and 40 degrees C, respectively. The enzyme degraded xylan and xylo-oligosides by an endo-splitting mechanism giving xylobiose, xylotriose and xylose as the main end-products. Activation energy and kinetic constants for xylan degradation were determined. Several metal ions such as Ag+ and Hg2+ inhibited the enzyme. The possible function of this endo-xylanase in Cr. albidus var. aerius is discussed.