Many terpenes and terpenoid compounds are known as bioactive substances with desirable fragrance and medicinal activities. Modification of such compounds to yield new derivatives with desired properties is particularly attractive. Cytochrome P450 monooxygenases are potential enzymes for these reactions due to their capability of performing different reactions on a variety of substrates. We report here the characterization of CYP264B1 from Sorangium cellulosum So ce56 as a novel sesquiterpene hydroxylase. CYP264B1 was able to convert various sesquiterpenes including nootkatone and norisoprenoids (α-ionone and β-ionone). Nootkatone, an important grapefruit aromatic sesquiterpenoid, was hydroxylated mainly at position C-13. The product has been shown to have the highest antiproliferative activity compared with other nootkatone derivatives. In addition, CYP264B1 was found to hydroxylate α- and β-ionone, important aroma compounds of floral scents, regioselectively at position C-3. The products, 3-hydroxy-β-ionone and 13-hydroxy-nootkatone, were confirmed by (1)H and (13)C NMR. The kinetics of the product formation was analyzed by high-performance liquid chromatography, and the K ( m ) and k (cat) values were calculated. The results of docking α-/β-ionone and nootkatone into a homology model of CYP264B1 revealed insights into the structural basis of these selective hydroxylations.