(FORTUNE Small Business) – There are few lines as memorably succinct as the career advice proffered to Dustin Hoffman's character in The Graduate, the 1967 movie classic. "Plastics, Ben. Plastics," intones an unctuous neighbor over cocktails in an opening scene of the film. Hoffman's character could be forgiven for his notably blank response. After all, for his generation "plastics" seemed the apotheosis of all that was slickly wrong with America in those tumultuous years. But to everything-even plastics-there apparently is a season, and maybe Hoffman's bumptious neighbor should be credited with being strangely prescient.

Plastics could be very cool indeed in the years ahead, if Oliver Peoples, an MIT-trained molecular biologist, has his way. In 1992 Peoples founded Metabolix Inc., a 30-employee company in Cambridge, Mass., whose business is understanding the inner life of plants and bacteria, notably how they make plastics. While the juxtaposition of the words "plastic" and "plants" may sound ludicrous, the basic elements of plastics actually occur naturally in plants. Metabolix has found a way, via biotechnology, to convert those elements to "monomers," microscopic strands of chemical building blocks, and then combine them to form "polymers," commonly known as plastics.

While using biotechnology to create drugs and tinker with foods has been routine for years, what Peoples labels "industrial biotechnology" is just starting to emerge. "The chemist's traditional view is that nature is messy," says Peoples in explaining why industry has been slow to harness biology to make things. Peoples prefers the word "complex," and therein lies a world of difference. Beneath all that complexity, says Peoples, lies precision. Metabolix's research has tapped into that precision to get plants and bacteria to make consistently high-quality plastics. In one process it has reengineered bacteria to turn them into highly efficient "biofactories." Feeding sugars and oils to bacteria in a fermentation process, the company has created bacteria that produce plastics amounting to more than 85% of the cell's weight. "We can commandeer the cell and ask it to do what we want," says CEO Jim Barber. He adds that the company has been able to do that at commercial scale, producing plastic at less than 50 cents a pound. That makes it competitive with the traditional petrochemical industry for many applications. Metabolix expects its first commercial sales later this year, probably in the form of plastic utensils sold to the government, which are completely biodegradable yet won't melt down in boiling water. That may sound like a modest start, but Metabolix, with more than 85 patents granted, is also ready to partner strategically with some of the giants of the petrochemical business, such as Dow, DuPont, and Exxon. Metabolix offers those companies the ability to make plastics using plants, not oil. Two years ago Metabolix received a five-year, $7.5 million grant from the Department of Energy to develop bioplastics in genetically engineered switchgrass. An Energy Department official familiar with Metabolix says it awarded the grant with two guidelines in mind: supplanting oil with renewable energies and slowing global warming. In that context, he says, "this has the potential to be an incredibly valuable and useful technology."

Once native to the Great Plains, switchgrass is the plant that early settlers eradicated to scratch out a living farming the prairie. Today U.S. farmers get paid by the government to leave 40 millions acres fallow each year. If that acreage were planted with a Metabolix genetically engineered strain of switchgrass, says Barber, it could produce 100 billion pounds of plastic-equal, amazingly enough, to the country's current annual production. --ED WELLES