Studies were carried out on caffeine degradation using Trichosporon asahii, a yeast species isolated from caffeine contaminated soil. There was 100 {\%} degradation of caffeine at 54 h by the yeast cells acclimated to the medium containing caffeine and sucrose both. Experiments with T. asahii growing on caffeine in the presence of 1 mM 1-aminobenzotriazole (ABT), an inhibitor of the cytochrome P-450 enzyme system, resulted inhibition of biomass production relative to positive control implicating the utilization of this enzyme system in caffeine degradation. The study of the enzymes responsible for caffeine degradation showed the enhanced activities of caffeine demethylases and xanthine oxidases. High Performance Liquid Chromatography (HPLC), Fourier Transform Infrared (FTIR) spectral analysis and Gas Chromatography -Mass Spectrometry (GC-MS) analysis of caffeine metabolites confirmed the biodegradation of caffeine by T. asahii. We propose the biodegradation pathway for caffeine which occurs via stepwise demethylation and oxidation process.