A 3.2 kb fragment of an indigenous Anabaena azollae plasmid was isolated and fully sequenced. Sequence analysis identified an open reading frame of 1110-bp that showed high similarity (56-71%) with glutathione dependent formaldehyde dehydrogenase genes (gdfaldh) from various bacteria. The identity of the gene was confirmed by expressing the gene in Escherichia coli with a pET-32 (a) vector followed by enzyme assay. Adjacent to the gdfaldh a second gene was detected that showed high similarity (53%) with an S-formylglutathione hydrolase (fgh) gene from the methylotrophic bacterium Paracoccus denitrificans. The presence of gdfaldh and fgh-like genes adjacent to each other may suggest that the corresponding gene products interact in a common metabolic pathway involved in removing exogenous or endogenous formaldehyde.