We demonstrate a novel and efficient bioprocess for production of the cephalosporin intermediates, 7-aminocephalosporanic acid (7-ACA) or 7-amino deacetoxycephalosporanic acid (7-ADCA). The Streptomyces clavuligerus expandase gene or the Cephalosporium acremonium expandase-hydroxylase gene, with and without the acetyltransferase gene, were expressed in a penicillin production strain of Penicillium chrysogenum. Growth of these transformants in media containing adipic acid as the side chain precursor resulted in efficient production of cephalosporins having an adipyl side chain, proving that adipyl-6-APA is a substrate for either enzyme in vivo. Strains expressing expandase produced adipyl-7-ADCA, whereas strains expressing expandase-hydroxylase produced both adipyl-7-ADCA and adipyl-7-ADAC (aminodeacetylcephalosporanic acid). Strains expressing expandase-hydroxylase and acetyltransferase produced adipyl-7-ADCA, adipyl-7-ADAC and adipyl-7-ACA. The adipyl side chain of these cephalosporins was easily removed with a Pseudomonas-derived amidase to yield the cephalosporin intermediates.