We have identified and functionally characterized a new Escherichia coli gene, dsbC, whose product is involved in disulfide bond formation in the periplasmic space. It corresponds to a previously sequenced open reading frame mapping upstream of recJ with no previously assigned function. Null mutations in dsbC were obtained using a screen for dithiothreitol (DTT)-sensitive mutants and were shown to result in the accumulation of reduced forms of a variety of disulfide bond-containing periplasmic proteins. This defect could be rescued by the addition of either oxidized DTT or cystine or by multicopy expression of dsbA, a known periplasmic disulfide oxidase. The DsbC protein is synthesized as a precursor form of 25.5 kDa which is processed to a 23.3 kDa mature species located in the periplasmic space. The DsbC protein was overexpressed, purified to homogeneity and shown to catalyse the reduction of insulin in a DTT-dependent manner at levels comparable with those of purified DsbA. The replacement of either cysteine residue of the predicted active site, F-(X4)-C-G-Y-C, completely inactivates DsbC protein function. We have further shown that in vivo overexpression of DsbC can functionally substitute for a loss of DsbA function. Taken together, all of our results demonstrate that DsbC acts in vivo as a disulfide oxidase.