A new type of horizontal biofilm bioreactor for continuous bioconversion of emulsified oily substrate by immobilized growing biofilm of filamentous fungi was designed, constructed, and feasibility tested. The new reactor design provides "self"-immobilization of homogenized mycelium leading to even biofilm development. This was accomplished by using stainless steel screens of optimal mesh, mounted in parallel and stretching outward from a main rotating axis of a biological rotating contractor. Each screen was equipped with a pair of stain less steel blades mounted on supports allowing for continuous biofilm "shaving" beyond a predetermined thickness, thus retaining freshly growing active biofilm surface. The feasibility of the new bioreactor was demonstrated by decalactone production from emulsified castor oil by immobilized filamentous fungi (Tyromyces sambuceus). The combination of oriented metal screens and moving blades was found to be highly effective for a model system in maintaining stable substrate emulsion in the reactor in either batchwise or continuous processing, as well as maintaining biofilm thickness with continuous removal of excess growing hyphae.