Oxalate is produced by several catabolic pathways in plants. The best characterized pathway for subsequent oxalate degradation is via oxalate oxidase, but some species, such as Arabidopsis thaliana, have no oxalate oxidase activity. Previously, an alternative pathway was proposed in which oxalyl-CoA synthetase (EC 6.2.1.8) catalyzes the first step, but no gene encoding this function has been found. Here, we identify acyl-activating enzyme3 (AAE3; At3g48990) from Arabidopsis as a gene encoding oxalyl-CoA synthetase. Recombinant AAE3 protein has high activity against oxalate, with K(m) = 149.0 ± 12.7 μM and V(max) = 11.4 ± 1.0 μmol/min/mg protein, but no detectable activity against other organic acids tested. Allelic aae3 mutants lacked oxalyl-CoA synthetase activity and were unable to degrade oxalate into CO(2). Seeds of mutants accumulated oxalate to levels threefold higher than the wild type, resulting in the formation of oxalate crystals. Crystal formation was associated with seed coat defects and substantially reduced germination of mutant seeds. Leaves of mutants were damaged by exogenous oxalate and more susceptible than the wild type to infection by the fungus Sclerotinia sclerotiorum, which produces oxalate as a phytotoxin to aid infection. Our results demonstrate that, in Arabidopsis, oxalyl-CoA synthetase encoded by AAE3 is required for oxalate degradation, for normal seed development, and for defense against an oxalate-producing fungal pathogen.