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ABSTRACT Efforts toward microbial conversion of lignin to value-added products face many challenges because lignin’s methoxylated aromatic monomers release toxic C₁byproducts such as formaldehyde. The ability to grow on methoxylated aromatic acids (e.g., vanillic acid) has been identified in certain clades of methylotrophs, bacteria characterized by their unique ability to tolerate and metabolize high concentrations of formaldehyde. Here, we use a phyllosphere methylotroph isolate,Methylobacterium extorquensSLI 505, as a model to identify the fate of formaldehyde during methylotrophic growth on vanillic acid.M. extorquensSLI 505 displays concentration-dependent growth phenotypes on vanillic acid without concomitant formaldehyde accumulation. We conclude thatM. extorquensSLI 505 overcomes metabolic bottlenecks from simultaneous assimilation of multicarbon and C₁intermediates by allocating formaldehyde toward dissimilation and assimilating the ring carbons of vanillic acid heterotrophically. We correlate this strategy with maximization of bioenergetic yields and demonstrate that formaldehyde dissimilation for energy generation rather than formaldehyde detoxification is advantageous for growth on aromatic acids.M. extorquensSLI 505 also exhibits catabolite repression during growth on methanol and low concentrations of vanillic acid, but no diauxic patterns during growth on methanol and high concentrations of vanillic acid. Results from this study outline metabolic strategies employed byM. extorquensSLI 505 for growth on a complex single substrate that generates both C₁and multicarbon intermediates and emphasizes the robustness ofM. extorquensfor biotechnological applications for lignin valorization.IMPORTANCELignin, one of the most abundant and renewable carbon sources on Earth, is a promising alternative to non-renewable fossil fuels used to produce petrochemicals. Degradation of lignin releases toxic C₁byproducts such as formaldehyde, and thus most microorganisms are not suitable for biorefining lignin. By contrast,Methylobacterium extorquensSLI 505 is capable of growth on high concentrations of aromatic acids without concomitant formaldehyde accumulation. In addition, we show that the growth ofM. extorquensSLI 505 on aromatic acids is coupled to the production of the bioplastic, polyhydroxybutyrate. Aromatic acids serve as a model by which to understand howM. extorquensSLI 505 balances methylotrophic and heterotrophic pathways during growth to provide strategies for growth optimization when using complex substrates in both ecological and industrial fermentation applications.