A fungus, Fusarium lateritium, with dimethylsulfoniopropionate (DMSP) lyase activity was isolated from both seawater and a salt marsh due to its ability to grow on DMSP (with the evolution of dimethyl sulfide) as the sole source of carbon. This is the first reported case of DMSP lyase activity in a fungus. Several other common fungal genera tested did not have DMSP lyase activity. DMSP was taken up more rapidly by F. lateritium than it was utilized, leading to its intracellular accumulation. Inhibitor studies with nystatin and cyanide indicated that DMSP uptake was an energy-dependent process. The lyase was inducible by its substrate, DMSP (K_m, 1.2 mM), and by the substrate analogs choline and glycine betaine. During induction, DMSP lyase activity increased with time and then dropped rapidly. This loss of activity could be prevented by spiking the culture with fresh DMSP or choline. The V_max for DMSP lyase was 34.7 mU · mg of protein¹. The inhibitory effects of nystatin, and p-chloromercuriphenylsulfonate on DMSP lyase activity suggested that the enzyme is cytosolic. Because plants like Spartina (a marsh grass) and marine algae contain high concentrations of DMSP, we speculate that DMSP-utilizing fungi may be involved in their decay.