This review describes the metabolism of alkanes in yeasts with special emphasis on the physiological function of peroxisomes. The subtle diversity in alkane utilization pathway in yeasts is mediated by subcellular localization of enzymes. In microsoomes, alkanes are hydroxylated to the corresponding fatty alcohols which are further oxidized to fatty acids via aldehydes in microsomes, mitochondria and peroxisomes, respectively. Degradation of fatty acids to acetyl-CoA via the beta -oxidation pathways is carried out exclusively in preoxisomes while fatty acids formed in microsomes and mitochondria are incorporated into cellular lipids, each after being activated to acyl-CoAs. Acetyl-CoA produced in peroxisomes is converted to C//4 -compounds by the cooperative action of peroxisomes and mitochondria. Some regulation of enzymes in alkane-assimilating yeasts is also discussed.