Cinnamyl alcohol dehydrogenase (CAD; EC 1.1.195) catalyses the conversion of p-hydroxy-cinnamaldehydes to the corresponding alcohols and is considered a key enzyme in lignin biosynthesis. In a previous study, an atypical form of CAD (CAD 1) was identified in Eucalyptus gunnii . We report here the molecular cloning and characterization of the corresponding cDNA, CAD 1-5, which encodes this novel aromatic alcohol dehydrogenase. The identity of CAD 1-5 was unambiguously confirmed by sequence comparison of the cDNA with peptide sequences derived from purified CAD 1 protein and by functional expression of CAD 1 recombinant protein in Escherichia coli. Both native and recombinant CAD 1 exhibit high affinity towards lignin precursors including 4-coumaraldehyde and coniferaldehyde, but they do not accept sinapaldehyde. Moreover, recombinant CAD 1 can also utilize a wide range of aromatic substrates including unsubstituted and substituted benzaldehydes. The open reading frame of CAD 1-5 encodes a protein with a calculated molecular mass of 35790 Da and an isoelectric point of 8.1. Although sequence comparisons with proteins in databases revealed significant similarities with dihydroflavonol-4-reductases (DFR; EC 18.104.22.168) from a wide range of plant species, the most striking similarity was found with cinnamoyl-CoA reductase (CCR; EC 22.214.171.124), the enzyme which directly precedes CAD in the lignin biosynthetic pathway. RNA blot analysis and immunolocalization experiments indicated that CAD 1 is expressed in both lignified and unlignified tissues/cells. Based on the catalytic activity of CAD 1 in vitro and its localization in planta, CAD 1 may function as an ‘alternative’ enzyme in the lignin biosynthetic pathway. However, additional roles in phenolic metabolism are not excluded.