The cell-free extract of Streptomyces sp. KO-2388, an albonoursin-producing strain, was found to catalyze the conversion of cyclo(L-Phe-L-Leu) to albonoursin. The conversion activity was simply determined by measuring the increase in ultraviolet (UV) absorption of the reaction mixture at 317 nm, lambda(max) (epsilon 25,400) of albonoursin, where cyclo(L-Phe-L-Leu) had no absorption. The optimum pH and temperature of this bioconversion using the cell-free extract were determined to be pH 8.0-9.5 and 60 degrees C, respectively. Under the optimum conditions, 620 mg/l of albonoursin was obtained with a conversion ratio of 62% after 24 h incubation. (C) 1999 Elsevier Science B.V. All rights reserved.