The development of heterologous overexpression systems for soluble proteins has greatly advanced the study of the structure/function relationships of these proteins and their biotechnological and pharmaceutical applications. In this paper we present an overview on several aspects of the use of the methylotrophic yeast Hansenula polymorpha as a host for heterologous gene expression. H. polymorpha has been successfully exploited as a cell factory for the large-scale production of such components. Stable, engineered strains can be obtained by site-directed integration of expression cassettes into the genome, for which various constitutive and inducible promoters are available to control the expression of the foreign genes. New developments have now opened the way to additional applications of H. polymorpha, which are unprecedented for other organisms. Most importantly, it may be the organism of choice for reliable, large-scale production of heterologous membrane proteins, using inducible intracellular membranes and targeting sequences to specifically insert these proteins stably into these membranes. Furthermore, the use of H. polymorpha offers the possibility to accumulate the produced components into specific compartments, namely peroxisomes. These organelles are massively induced during growth of the organism on methanol and may occupy up to 80% of the cell volume. Accumulation inside peroxisomes prevents undesired modifications (e.g. proteolytic processing or glycosylation) and is also in particular advantageous when proteins are produced which are toxic or harmful for the host. (C) 2000 Elsevier Science Inc. All rights reserved.