Yeast is a one-celled fungus (a living organism) that exists in many forms. For baking (fermentation) purposes, it produces carbon dioxide when mixed with warm water, flour, salt, and/or sugar, which cause expansion in dough. Yeast is a one-celled fungus that converts sugar and starch into carbon dioxide bubbles and alcohol. This has made it a useful ally in the production of bread, beer, and wine. There are many varieties of yeast: Â·Active Dry/Rapid Rise/Bread Machine - These are often referred to as baker's yeast.