A 27,690-bp gene cluster involved in the degradation of the plant alkaloid nicotine was characterized from the plasmid pAO1 of Arthrobacter nicotinovorans. The genes of the heterotrimeric, molybdopterin cofactor (MoCo)-, flavin adenine dinucleotide (FAD)-, and [Fe-S] cluster-dependent 6-hydroxypseudooxynicotine (ketone) dehydrogenase (KDH) were identified within this cluster. The gene of the large MoCo subunit of KDH was located 4,266 bp from the FAD and [Fe-S] cluster subunit genes. Deduced functions of proteins encoded by open reading frames (ORFs) of the cluster were correlated to individual steps in nicotine degradation. The gene for 2,6-dihydroxypyridine 3-hydroxylase was cloned and expressed in Escherichia coli. The purified homodimeric enzyme of 90 kDa contained 2 mol of tightly bound FAD per mol of dimer. Enzyme activity was strictly NADH-dependent and specific for 2,6-dihydroxypyridine. 2,3-Dihydroxypyridine and 2,6-dimethoxypyridine acted as irreversible inhibitors. Additional ORFs were shown to encode hypothetical proteins presumably required for holoenzyme assembly, interaction with the cell membrane, and transcriptional regulation, including a MobA homologue predicted to be specific for the synthesis of the molybdopterin cytidine dinucleotide cofactor.