Pseudomonas sp. strains C5pp and C7 degrade carbaryl as the sole carbon source. Carbaryl hydrolase (CH) catalyzes the hydrolysis of carbaryl to 1-naphthol and methylamine. Bioinformatic analysis of mcbA, encoding CH, in C5pp predicted it to have a transmembrane domain (Tmd) and a signal peptide (Sp). In these isolates, the activity of CH was found to be 4-to 6-fold higher in the periplasm than in the cytoplasm. The recombinant CH (rCH) showed 4-fold-higher activity in the periplasm of Escherichia coli. The deletion of Tmd showed activity in the cytoplasmic fraction, while deletion of both Tmd and Sp (Tmd + Sp) resulted in expression of the inactive protein. Confocal microscopic analysis of E. coli expressing a (Tmd + Sp)-green fluorescent protein (GFP) fusion protein revealed the localization of GFP into the periplasm. Altogether, these results indicate that Tmd probably helps in anchoring of polypeptide to the inner membrane, while Sp assists folding and release of CH in the periplasm. The N-terminal sequence of the mature periplasmic CH confirms the absence of the Tmd + Sp region and confirms the signal peptidase cleavage site as Ala-Leu-Ala. CH purified from strains C5pp, C7, and rCH.(Tmd) a were found to be monomeric with molecular mass of similar to 68 to 76 kDa and to catalyze hydrolysis of the ester bond with an apparent K-m and V-max in the range of 98 to 111 mu M and 69 to 73 mu mol.min(-1).mg(-1), respectively. The presence of low-affinity CH in the periplasm and 1-naphthol-metabolizing enzymes in the cytoplasm of Pseudomonas spp. suggests the compartmentalization of the metabolic pathway as a strategy for efficient degradation of carbaryl at higher concentrations without cellular toxicity of 1-naphthol. IMPORTANCE Proteins in the periplasmic space of bacteria play an important role in various cellular processes, such as solute transport, nutrient binding, antibiotic resistance, substrate hydrolysis, and detoxification of xenobiotics. Carbaryl is one of the most widely used carbamate pesticides. Carbaryl hydrolase (CH), the first enzyme of the degradation pathway which converts carbaryl to 1-naphthol, was found to be localized in the periplasm of Pseudomonas spp. Predicted transmembrane domain and signal peptide sequences of Pseudomonas were found to be functional in Escherichia coli and to translocate CH and GFP into the periplasm. The localization of low-affinity CH into the periplasm indicates controlled formation of toxic and recalcitrant 1-naphthol, thus minimizing its accumulation and interaction with various cellular components and thereby reducing the cellular toxicity. This study highlights the significance of compartmentalization of metabolic pathway enzymes for efficient removal of toxic compounds.