The biosynthesis of the anticancer drug Taxol in yew (Taxus) species is thought to involve the preliminary formation of the advanced taxane diterpenoid intermediate baccatin III upon which the functionally important N-benzoyl phenylisoserinoyl side chain is subsequently assembled at the C13-O-position. In vivo feeding studies with Taxus tissues and characterization of the two transferases responsible for C13-side chain construction have suggested a sequential process in which an aminomutase converts alpha-phenylalanine to beta-phenylalanine which is then activated to the corresponding CoA ester and transferred to baccatin III to yield beta-phenylalanoyl baccatin III (i.e., N-debenzoyl-2'-deoxytaxol) that undergoes subsequent 2'-hydroxylation and N-benzoylation to afford Taxol. However, because the side chain transferase can utilize both beta-phenylalanoyl CoA and phenylisoserinoyl CoA in the C13-O-esterification of baccatin III, ambiguity remained as to whether the 2'-hydroxylation step occurs before or after transfer of the amino phenylpropanoyl moiety. Using cell-free enzyme systems from Taxus suspension cells, no evidence was found for the direct hydroxylation of beta-phenylalanine to phenylisoserine; however, microsomal preparations from this tissue appeared capable of the cytochrome P450-mediated hydroxylation of beta-phenylalanoyl baccatin III to phenylisoserinoyl baccatin III (i.e., N-debenzoyltaxol) as the penultimate step in the formation of Taxol and related N-substituted taxoids. These preliminary results, which are consistent with the proposed side chain assembly process, have clarified an important step of Taxol biosynthesis and set the foundation for cloning the responsible cytochrome P450 hydroxylase gene.