We identified a gene, designated TRM2, responsible for methanol-inducible gene expression in the methylotrophic yeast Candida boidinii. The encoded protein Trm2p contains two C(2)H(2)-type zinc finger motifs near the N terminus and shows high similarity to Saccharomyces cerevisiae Adr1p and Pichia pastoris Mxr1p. A C. boidinii gene-disrupted strain (trm2 delta) could not grow on methanol or oleate, but could grow on glucose or ethanol. Trm2p was necessary for the activation of five methanol-inducible promoters tested. Trm2p was localized to the nucleus during growth on nonfermentable carbon sources, but to the cytosol during growth on glucose. A chromatin immunoprecipitation assay revealed that Trm2p specifically bound to the promoters of the alcohol oxidase gene (AOD1) and the dihydroxyacetone synthase gene in cells grown on methanol or oleate, but did not bind to these promoters in cells grown on glucose. The derepressed level of expression of AOD1, which was observed in the trm1 delta strain (the TRM1 gene encodes a transcription factor responsible for methanol-specific gene activation), was decreased in the trm1 delta trm2 delta strain to a level similar to that observed in the trm2 delta strain. These results suggest that Trm2p-dependent derepression is essential for the Trm1p-dependent methanol-specific gene activation in C. boidinii.