Osmotically sensitive mutants of Neurospora crassa are unable to grow on medium supplemented with 4% NaCl, have altered morphologies and cell-wall compositions, and are resistant to dicarboximide fungicides. Osmotic-1 (os-1) mutants have a unique characteristic of forming protoplasts that grow and divide in specialized liquid medium, suggesting that the os-1(+) gene product is important for cell-wall assembly. A cosmid containing the os-1(+) locus of N. crassa, isolated from a genomic cosmid library by chromosomal walk from a closely linked gene, was used to subclone the os-li gene by functional complementation of an os-1 mutant. Analysis of the sequence of complementing DNA predicts that os-1(+) encodes a predicted protein similar to sensor-histidine kinases of bacteria and a yeast osmosensor-histidine kinase. Importantly, the predicted os-1(+) protein is identical to the N. crassa nik-1 predicted protein that was identified by using polymerase chain reaction primers directed against histidine kinase consensus DNA sequences. Our results indicate that nik-1 and os-1 encode the same osmosensing histidine kinase that plays an important role in the regulation of cell-wall assembly and, probably, other cell responses to changes in external osmolarity.