Both toxicity and penicillin productivity of the hydroxylated derivatives of phenylacetic acid (PA) and phenoxyacetic acid (POA) were highly dependent on the position of hydroxylation on the aromatic ring in Penicillium chrysogenum. Hydroxylation at position 2 diminished penicillin production but the compounds retained most of their toxicity. On the other hand, hydroxylation at position 4 resulted in barely toxic derivatives with still significant penicillin productivity. 3-Hydroxy-PA was a weak side-chain precursor with considerably reduced toxicity. The activity of the glutathione-dependent detoxification pathway correlated well with the toxicity of the compounds but there was no correlation between acidity, toxicity and penicillin productivity.