The gene encoding the multifunctional protein (MFP) of peroxisomal beta-oxidation in Saccharomyces cerevisiae was isolated from a genomic library via functional complementation of a fox2 mutant strain. The open reading frame consists of 2700 base pairs encoding a protein of 900 amino acids. The predicted molecular weight (98,759) is in close agreement with that of the isolated polypeptide (96,000). Analysis of the deduced amino acid sequence revealed similarity to the MFPs of two other fungi but not to that of rat peroxisomes or the multifunctional subunit of the Escherichia coli beta-oxidation complex. The FOX2 gene was overexpressed from a multicopy vector (YEp352) in S. cerevisiae and the gene product purified to apparent homogeneity. A truncated version of MFP lacking 271 carboxyl-terminal amino acids was also overexpressed and purified. Experiments to study the enzymatic properties of the wild-type MFP demonstrated an absence of activities originally assigned to an MFP of S. cerevisiae (crotonase, L-3-hydroxyacyl-CoA dehydrogenase, and 3-hydroxyacyl-CoA epimerase), whereas two other activities were found: 2-enoyl-CoA hydratase 2 (converting trans-2-enoyl-CoA to D-3-hydroxyacyl-CoA) and D-3-hydroxyacyl CoA dehydrogenase (converting D-3-hydroxyacyl-CoA to 3-ketoacyl-CoA). The truncated form contained only the D-3-hydroxyacyl-CoA dehydrogenase activity. These results clearly demonstrate that the beta-oxidation of fatty acids in S. cerevisiae follows a previously unknown stereochemical course, namely it occurs via a D-3-hydroxyacyl-CoA intermediate.