The presence of constitutive, intracellular and extracellular enzymes catalysing the hydrolysis of glycine bile acid conjugates in the fungus Cercospora melonis CBS 162.60 was demonstrated by the use of cell-free systems. Shake flask and fermenter studies were undertaken to determine environmental factors favouring high free bile acid yields. Two major factors were observed to reduce such yields. These were the binding of the bile acid to the mycelium and the degradation of free bile acids to non-steroidal products by the fungus. Whole-cell cultures of C. melonis exhibited poor utilisation of taurine conjugates with no concomitant production of free bile acid. Incubation of synthetic bile conjugate analogues with C. melonis and the use of cell-free systems suggested that this was due to two major factors: firstly, the specificity of the extracellular enzyme for α-aminocarboxylic acid conjugates and secondly, the apparent inability of taurine conjugates to gain access to a constitutive, intracellular cholanoyl taurine hydrolase. It is proposed that the poor permeability of the fungal cell membrane is responsible. Hence, the low activity of whole-cell cultures of C. melonis on taurine conjugates suggests that an industrial process employing the fungal hydrolysis of gall is not feasible. Comparative studies with Curvularia fallax IFO 8885 showed that it possessed superior specific hydrolase activity on glycodeoxycholic acid compared to C. melonis, although this is not apparent from qualitative screening. The abilities of C. melonis, Curvularia coicis IFO 7278 and Aspergillus ochraceus IFO 4071 (Wilhelm) to 7α-dehydroxylate cholic acid and its natural conjugates were investigated. Despite the presence of an apparently constitutive, intracellular 7α-hydroxycholanoyl dehydroxylase in these organisms, only low yields of dehydroxylated products were obtained with whole-cell cultures.