Although Basidiomycetes represent the most evolved class of fungi, they have been neglected with regard to recombinant gene expression. In this work, basidiomycetous yeasts belonging to Pseudozyma spp. were studied with respect to their amenability to heterologous protein production. Single plasmid or cotransformation experiments routinely afforded 100 to 200 independent transformants for the two tested species of Pseudozyma. Green fluorescent protein (GFP) was expressed in the correctly folded conformation, as demonstrated by fluorescence microscopy, and hen egg white lysozyme (HEWL) was expressed in its active form, as revealed by its lytic activity on Micrococcus lysodeikticus cells. Protease analysis established that Pseudozyma spp. contained equivalent or less extracellular protease activity than yeasts and far less protease activity than ascomycetous filamentous fungi in similar culture conditions. This proteolytic activity was inhibited by over 97% with a combination of PMSF and Pepstatin A. N-glycosylation patterns of native Pseudozyma flocculosa secreted proteins were comprised of one or a few short glycan chains that possess a classic eukaryotic structure typical of higher fungi and animal cells. This is the first report of a Basidiomycete that possesses multiple intrinsic characteristics necessary for use as a heterologous gene expression system.