Sixteen new cultures of propane-utilizing bacteria were isolated from lake water from Warinanco Park, Linden, N.J. and from lake and soil samples from Bayway Refinery, Linden, N.J. In addition, 19 known cultures obtained from culture collections were also found to be able to grow on propane as the sole carbon and energy source. In addition to their ability to oxidize n-alkanes, resting-cell suspensions of both new cultures and known cultures grown on propane oxidize short-chain alkenes to their corresponding 1,2-epoxides. Among the substrate alkenes, propylene was oxidized at the highest rate. In contrast to the case with methylotrophic bacteria, the product epoxides are further metabolized. Propane and other gaseous n-alkanes inhibit the epoxidation of propylene. The optimum conditions for in vivo epoxidation are described. Results from inhibition studies indicate that a propane monooxygenase system catalyzes both the epoxidation and hydroxylation reactions. Experiments with cell-free extracts show that both hydroxylation and epoxidation activities are located in the soluble fraction obtained after 80,000 x g centrifugation.