Biotransformation of natural products has great potential for producing new drugs and could provide in vitro models of mammalian metabolism. Microbial transformation of the cytotoxic steroid cinobufagin was investigated. Cinobufagin could be specifically hydroxylated at the 12 beta-position by the fungus Alternaria alternata. Six products from a scaled-up fermentation were obtained by silica gel column chromatography and reversed-phase liquid chromatography and were identified as 12 beta-hydroxyl cinobufagin, 12 beta-hydroxyl desacetylcinobufagin, 3-oxo-12 beta-hydroxyl cinobufagin, 3-oxo-12 beta-hydroxyl desacetylcinobufagin, 12-oxo-cinobufagin, and 3-oxo-12 alpha-hydroxyl cinobufagin. The last five products are new compounds. 12 beta-Hydroxylation of cinobufagin by A. alternata is a fast catalytic reaction and was complete within 8 h of growth with the substrate. This reaction was followed by dehydrogenation of the 3-hydroxyl group and then deacetylation at C-16. Hydroxylation at C-12 beta also was the first step in the metabolism of cinobufagin by a variety of fungal strains. In vitro cytotoxicity assays suggest that 12 beta-hydroxyl cinobufagin and 3-oxo-12 alpha-hydroxyl cinobufagin exhibit somewhat decreased but still significant cytotoxic activities. The 12 beta-hydroxylated bufadienolides produced by microbial transformation are difficult to obtain by chemical synthesis.