Cells and cell-free preparations of a soil-bioremediating organism, Rhodococcus chlorophenolicus PCP-1, dehalogenated polychlorophenols both under aerobic and anaerobic conditions. Under aerobic conditions molecular O2 served as the source of oxygen for the dechlorinating para-hydroxylation reaction. Chlorophenols were dehalogenated and para-hydroxylated also under anaerobic conditions by a cyt P-450 enzyme. Water was used anaerobically as an oxygen source but the reaction required the presence of sulphite ions or iodosobenzene. When the dehalogenating enzyme was given a choice between molecular O2 and water in the presence of sulphite ions or iodosobenzene, the oxygen was preferably derived from water.