Reichstein's compound S was successfully converted to prednisolone in a single-step fermentation using a mixed culture of Curvularia lunata and Mycobacterium smegmatis. Introducing additional medium at the time of bacterial inoculation and increasing the M. smegmatis inoculum to 8% were necessary for maximal dehydrogenation of cortisol to prednisolone (86%). However, beef extract, corn-steep solids, and malt extract were inhibitory to the dehydrogenase activity and stimulatory to hydroxylase. Of the vitamins tested, nicotinic acid and riboflavin at 0.2 and 1.13 mg/L, respectively, resulted in maximum transformation of Reichstein's compound S (100%) and optimized prednisolone yields (92%) in the mixed culture. The trace elements present in the medium were sufficient for maximal transformation, and there was no need for an exogenous supply. Addition of ATP, sodium acetate, and NAD inhibited the dehydrogenation reaction.