Biotransformation of danazol (17 beta-hydroxy-17 alpha-pregna-2,4-dien-20-yno-[2,3-d] isoxazole) (1) on fermentation with Fusarium solani yielded 17 beta-hydroxy-2-(hydroxymethyl)-17 alpha-pregn-4-en-20-yn-3-one (2) and 17 beta-hydroxy-2-(hydroxymethyl)-17 alpha-pregna-1,4-dien-20-yn-3-one (3), while the fermentation of 1 with Gibberella fujikuorii yielded compound 2 only. The structures of these compounds were deduced on the basis of modern spectroscopic techniques. Prolyl endopeptidase inhibition activities of danazol (1) and its transformed products 2 and 3 are also studied.