Tolaasins are lipodepsipeptides secreted by Pseudomonas tolaasii, the causal agent of brown blotch disease of mushrooms, and are the toxins that cause the brown spots. We previously reported that Microbacterium foliorum NBRC 103072^T is an effective tolaasin-detoxifying bacterium. In this study, we aimed to characterize the tolaasin-detoxification process of M. foliorum NBRC 103072^T. The tolaasin-detoxification by M. foliorum NBRC 103072^T was carried out by hydrolyzation of tolaasins at two specific sites in the peptide moiety of tolaasins by its cells, and the resulting fragments were released from bacterial cells. The tolaasin-hydrolyzing activity can be extracted by neutral detergent solution from M. foliorum NBRC 103072^T cells. Moreover, tolaasin-adsorption to the bacterial cells occurred prior to hydrolyzation of tolaasins, which might contribute to the effective tolaasin-detoxification by M. foliorum NBRC 103072^T. It is notable that the tolaasin-degradation process by M. foliorum NBRC 103072^T is carried out by hydrolyzation at specific sites in the peptide moiety of lipopeptide by bacterial cells as a novel biological degradation process of cyclic lipopeptides.