Previously we reported production of an extracellular lignin-inducible peroxidase by Streptomyces viridosporus (M. Ramachandra, D.L. Crawford, and A.L. Pometto III, Appl. Environ. Microbiol. 53:2754-2760, 1987). This peroxidase was shown to oxidize 3,4-dihydroxyphenylalanine, 2,4-dichlorophenol, homoprotocatechuic acid, caffeic acid, and N,N,N',N'-tetramethylphenylenediamine and was found in higher than normal levels in strains enhanced for lignocellulose degradation. In the present study, we used a pure extracellular enzyme preparation with high peroxidase isoform P3 activity to oxidize lignin substructure model compounds of both the 1,2-diaryl propane and arylglycerol-beta-aryl ether types and containing C alpha-carbonyl and C alpha-hydroxyl groups. The reactions were monitored by gas chromatography-mass spectrometry and high-pressure liquid chromatography techniques. In the presence, but not the absence, of hydrogen peroxide, the enzyme preparation catalyzed C alpha-C beta bond cleavage in the side chains of the diaryl ethers 1-(3,4-dimethoxyphenyl)-2-(2-methoxyphenoxy)propane-1,3-diol (I) and 1-(4-hydroxy-3-methoxyphenyl)-2-(2-methoxyphenoxy)propan-1-one (II) and the diaryl ethane 1-(4-methoxyphenyl)-2-(phenyl)ethan-1-one (III). Rapid hydrogen peroxide consumption was observed when the enzyme preparation was added to either milled corn lignin or lignocellulose. Additional characterizations showed that this enzyme is a heme protein (Soret band, 408 nm) and a major component of the ligninolytic system of S. viridosporus T7A. This is the first report of a lignin peroxidase in a bacterium. We have designated this new lignin peroxidase as ALiP-P3.