While in search of an enzyme for the conversion of xylose to xylitol at elevated temperatures, a xylose reductase (XR) gene was identified in the genome of the thermophilic fungus Chaetomium thermophilum. The gene was heterologously expressed in Escherichia coli as a His6-tagged fusion protein and characterized for function and structure. The enzyme exhibits dual cofactor specificity for NADPH and NADH and prefers D-xylose over other pentoses and investigated hexoses. A homology model based on a XR from Candida tenuis was generated and the architecture of the cofactor binding site was investigated in detail. Despite the outstanding thermophilicity of its host the enzyme is, however, not thermostable.