The gas carbon dioxide (CO2) plays a critical role in microbial and mammalian respiration, photosynthesis in algae and plants, chemoreception in insects, and even global warming . However, how CO2 is transported, sensed, and metabolized by microorganisms is largely not understood. For instance, CO2 is known to induce production of polysaccharide capsule virulence determinants in pathogenic bacteria and fungi via unknown mechanisms . Therefore, we studied CO2 actions in growth, differentiation, and virulence of the basidiomycetous human fungal pathogen Cryptococcus neoformans. The CAN2 gene encoding beta-carbonic anhydrase in C. neoformans was found to be essential for growth in environmental ambient conditions but dispensable for in vivo proliferation and virulence at the high CO2 levels in the host. The can2Delta mutant in vitro growth defect is largely attributable to defective fatty acid synthesis. CO2 was found to inhibit cell-cell fusion but not filamentation during sexual reproduction. The can2 mutation restored early mating events in high CO2 but not later steps (fruiting body formation, sporulation), indicating a major role for carbonic anhydrase and CO2/HCO3- in this developmental cascade leading to the production of infectious spores. Our studies illustrate diverse roles of an ancient enzyme class in enabling environmental survival of a ubiquitous human pathogen.