Molecular dissection of the genes responsible for the formation of extracellular polysaccharide capsule, the major virulence factor of Cryptococcus neoformans, a serious fungal pathogen causing infection primarily in immunocompromised patients: A wild type genomic DNA library of C. neoformans B-3501 constructed on a plasmid containing 20 repeats of C. neoformans telomeric sequence and URA5 gene (as a selection marker) was used to complement various ura5, cap mutants. After pheno- typic complementation was observed, the plasmids contining appropriate DNA inserts was rescued by E. coli. Subsequent complementation of various Cap mutants with the subclones of the insert DNA's indicated that we have cloned two more genes, CAP64 and CAP17 in addition to the CAP59 which was cloned in 1994. When the capsule deficient phenotype was complemented with cloned sequences of CAP64 or CAP17, the originally avirulent mutants regained the same degree of virulence with that found in a highly virulent serotype D strain. DNA sequence analysis revealed that CAP64 and CAP17 encode two novel proteins. The CAP64 deleted strains became acapsular, indicating that CAP64 is essential for the formation of capsule. Futher characterization of the gene CAP59 indicated that it is clustered with a convergently transcribed ribosomal protein gene, L27. By using an inducible promoter (GAL7), the missence mutation (glycine to serine) found in the original CAP59 strain was confirmed as the cause of the acapsular phenotype in the mutant. The two genes were found to be on two separate chromosomes, unlike previous reports that the two loci are closely linked. The CAP64 gene was found to be joined with a convergently transcribed gene which shares significant similarity to the yeast proteasome subunit, PRE1. An ARS-like sequence of 1.2kb which allows stable maintenance of an episomal transforming plasmid in C. neoformans was isolated. The sequence was obtained from a 6kb NotI-EcoRI genomic DNA insert cloned from a DNA library of a very stable minichromosomes generated in a URA5 transformant of C. neoformans. The sequence of the 18S rDNA from F. depauperata, the only other species described in the genus Filobasidiella besides the sexual state of C. neoformans, was determined and the sequence was alligned with those of 15 other heterobasidiomycetous fungi in order to place them in a phylogenetic tree. Despite the fundamental differences between F. depaupera, which lacks yeast state and animal pathogenicity, and C. neoformans, the two fungi were shown to be most closely evolved from the Tremella lineage.