The Red Rectangle(1) is the prototype of a class of carbon-rich reflec
tion nebulae surrounding low-mass stars in the final stages of evoluti
on. The central star of this nebula has ejected most of its layers (du
ring the red-giant phase), which now form the surrounding cloud, and i
s rapidly evolving to a white dwarf. This star is also a member of a w
ide binary system(2), which is surrounded by a thick, dusty disk of ma
terial(3,4). Here we report infrared observations of the Red Rectangle
that reveal the presence of oxygen-rich material: prominent emission
bands from crystalline silicates, and absorption lines arising from ca
rbon dioxide. The oxygen-rich material is located in the circumbinary
disk, in contrast to the previously known carbon-rich dust, which is f
ound mainly in the extended nebula(5'6). The properties of the oxygen-
rich dust are similar to those of dusty disks surrounding young stars(
7), which are believed to be the sites of planet formation. Grain proc
essing, and perhaps even planet formation, may therefore also be occur
ring in the circumbinary disk of this evolved star.