Biphenyl metabolism in Aspergillus toxicarius occurs by successive hydroxylations in the 4- and 4'-positions, followed by conjugation with sulfate to produce 4-hydroxybiphenyl-O-sulfonic acid and 4,4'-dihydroxybiphenyl-O-sulfonic acid. The hydroxylation reactions normally occur only after a prolonged lag period after which the appearance of the monohydroxylated compound precedes the dihydroxylated compound. The accumulation of the monohydroxy compound is transient; therefore, it is an intermediate in the hydroxylating pathway. The onset of hydroxylating activity can be greatly accelerated when the culture is primed with the intermediate or product of the reaction (4-hydroxybiphenyl or 4,4'-dihydroxybiphenyl) at the time of biphenyl addition; a concentration of 0.05 mg 4,4'-dihydroxybiphenyl per ml produces optimal induction. Water-soluble conjugates of 4-hydroxybiphenyl and 4,4'-dihydroxybiphenyl were found in cultures of A. toxicarius grown in the presence of biphenyl plus inducer. The conjugate was shown to be the sulfate ester; no glucuronide or other conjugate species was found in any phase of the transformation. As with hydroxylating activity, the sulfotransferase activity appeared to be induced by the products of biphenyl metabolism.