A genomic library of Bacillus subtilis CD4 was constructed in Escherichia coli JM83. A clone designated as E. coli pBcelR was identified which formed blue colony in presence of 5-bromo-4-chloro-3-indolyl-beta-D-glucopyranoside (X-Glu) and hydrolysed carboxymethyl cellulose (CMC). The clone E. coli (pBcelR) expressed both cellobiase and endoglucanase activities and contained an insert of 1.2 kb. E. coli pBcelR encoded a protein of 12.9 kDa which was endowed with bifunctional (endoglucanase and cellobiase) activities. In recombinant E. coli, the encoded protein and enzyme activity were localized in periplasm. Recombinant E. coli pBcelR utilized CMC, cellobiose and soluble cellulose as sole carbon source.