Thermophilic bacteria capable of degrading phenol as the sole carbon source were isolated from sewage effluent. The isolates were aerobic. sporulating, motile rod-shaped bacteria characterized as Bacillus species with growth temperature optima of 50-60 degrees C. The enzyme catalyzing the second step in the phenol degradation meta-cleavage pathway, catechol-2,3-dioxygenase, was detected in all isolates grown in the presence of phenol. One strain, designated Bacillus strain Cro3.2, was capable of degrading phenol, o-, m-, and p-cresol via the meta-pathway and tolerated phenol at concentrations up to 0.1% (w/v) without apparent inhibition of growth. Phenol degradation activities in strain Cro3.2 were induced 3-5 h after supplementation by phenol, orcinol, and the cresols bur not by halo- or nitro-substituted phenols. Maximal rates of phenol degradation in stirred bioreactors (10 mu mol/min(-1)/g(-1) cells) were achieved at an O-2 delivery rate of 1.0 vvm and temperatures of 45-60 degrees C; however, catechol-2,3-dioxygenase (bur not 2-hydroxymuconic semialdehyde dehydrogenase) was rapidly inactivated at high oxygen concentrations. Whole cells of Bacillus strain Cro3.2 entrapped in calcium alginate, polyacrylamide, and agarose gels showed widely different rates of phenol degradation. In calcium alginate gels, rapid loss of phenol-degrading activity was attributed to calcium-induced inactivation of catechol-2,3-dioxygenase. No stabilization with respect to oxygen-induced inactivation was observed under any of the immobilization conditions. It is concluded that the counteractive effects of oxygen limitation at low dO(2) and inactivation of catechol-2,3-dioxygenase at high dO(2) levels pose a significant impediment to the use of resting thermophile cells in the treatment of phenolic waste streams.