The application of Penicillium notatum genus for biotransformations of steroids has been investigated. The reactions observed include insertion of an oxygen atom into D-ring of steroids, 15alpha-hydroxylation of 17alpha-methyl testosterone derivatives, ester bond hydrolysis, and degradation of a testosterone derivatives side chain. Microbial production of testolactones, the biologically active compounds, was also achieved using this strain in up to 98% yield.