Hydroxylation is an important route to synthesize more hydrophilic compounds of pharmaceutical significance. Microbial hydroxylation offers advantages over chemical means for its high specificity. In this study, a fungal strain Alternaria alternata AS 3.4578 was found to be able to catalyze the specific 12beta-hydroxylation of a variety of cytotoxic bufadienolides. Cinobufagin and resibufogenin could be completely metabolized by A. alternata to generate their 12beta-hydroxylated products in high yields (>90%) within 8 h of incubation. A. alternata could also convert 3-epi-desacetylcinobufagin into 3-epi-12beta-hydroxyl desacetylcinobufagin as the major product (70% yield). C-3 dehydrogenated products were detected in these reactions in fair yields, while their accumulation was relatively slow. The 12beta-hydroxylation of bufadienolides could be significantly inhibited by the substitution of 1beta-, 5-, or 16alpha-hydroxyl groups, and the 14beta,15beta-epoxy ring appeared to be a necessary structural requirement for the specificity. For the biotransformation of bufalin, a 14beta-OH bufadienolide, this reaction was not specific, and accompanied by 7beta-hydroxylation as a parallel and competing metabolic route. The biotransformation products were identified by comparison with authentic samples or tentatively characterized by high-performance liquid chromatography-diode array detection-atmospheric pressure chemical ionization-mass spectrometry analyses.