The effect of reduced oxygen supply on the production of a recombinant protein (plasmid-encoded beta-galactosidase) was investigated in Escherichia coli. A novel modified bubble tank reactor was used to provide a direct comparison between immobilized and suspended cells in identical environments except for the immobilization matrix. Decreased oxygen supply led to increased beta-galactosidase synthesis by both immobilized and suspended cells. Immobilized cells produced similar amounts of beta-galactosidase as the suspended cells. Lactose consumption and acetate production, on a per cell basis, were significantly higher in immobilized cells, suggesting that immobilized cells utilized fermentative metabolism. However, a transport analysis of the immobilized cell system showed that immobilized cells were not subject to either external or internal mass transfer gradients.