Cystobasidium species are mostly found in temperate or cold environments. They have been isolated from a wide range of habitats: plants, soils, rocks, aquatic environments and indoor dust. The genus Cystobasidium mainly consists of species of red yeasts in the Rhodotorula minuta clade. These basidiomycetous yeast species are commonly found in temperate to cold regions. In the present study, two strains of Cystobasidium sp. were isolated from decaying wood of housing on the Faroe Islands, where the average yearly temperature ranges from 2°C to 13°C. The sequences of the two strains had two identical gaps within the ITS1ހ5.8SހITS2 region and a second gap within the D1/D2 LSU unit, when aligned to those of C. laryngis CBS 2221, their closest match. The isolates were designated as Cystobasidium sp. Both isolates converted vanillin into vanillyl alcohol in the presence of oxygen. The biotransformation of vanillin into vanillyl alcohol has been documented for only a few species of fungi, but to our knowledge, it has not previously been reported for any basidiomycetous yeast species. Rhodotorula rubra, a distantly related basidiomycetous yeast converts vanillin into vanillic acid. In the present study, the two isolates of Cystobasidium sp. did not produce any trace of vanillic acid, as determined by LC-MS, 1HހNMR and GC. Oxidizing vanillin into vanillic acid should be preferred by the fungi, since it results in more chemical energy, as compared to reducing it to vanillyl alcohol. The fungus may choose this pathway to escape the toxicity of both vanillin and vanillic acid. Vanillin has antimicrobial activity, and vanillic acid is more toxic than vanillyl alcohol. Vanillin is a constituent of the lignin molecule. Cystobasidium species are commonly found in the phyllosphere. Their ability to utilize plant chemicals should render them successful competitors on plants and wood.