A D-amino acid oxidase-producing yeast, Rhodosporidium toruloides CCRC 20306, was used to convert cephalosporin C (Ceph C) into alpha-ketoadipyl cephalosporanic acid. A part of Ceph C could be directly converted into glutaryl-7-aminocephalosporanic acid (GL-7-ACA) by permeated cells of CCRC 20306. There were unknown side products formed during the conversion. The side products could be substantially reduced in amount by heating the cell extract containing D-alanine at 55 degrees C for 5 min for five cycles prior to the conversion. Esterase activity present in the cell extract, which might be one of the causes of the side reaction, was greatly diminished by heat treatment.