The xylose-fermenting yeasts Candida shehatae and Pichia stipitis were compared from extent of nuclear DNA complementarity and ribosomal RNA sequence similarity. Low levels of DNA relatedness confirmed that the two taxa are distinct biological species, but the similarity of rRNA sequences suggests that they only recently diverged. C. shehatae is comprised of three genetically divergent (ca. 50% DNA relatedness) subgroups that were accorded varietal status: C. shehatae var. shehatae, var. lignosa and var. insectosa. Estimates of phylogenetic distance from rRNA sequence similarity show C. shehatae and P. stipitis to be more closely related to Pachysolen tannophilus than to Saccharomyces cerevisiae, and that all of these budding yeasts are well separated from Schizosaccharomyces pombe.