The 11-beta hydroxylation of the steroid precursor Reichstein’s substance S (cortexolone) to hydrocortisone by Curvularia lunata cells is used as a model system for investigating the basis of the effect of solvent choice on multiphase biotransformation reaction kinetics. The effect of solvent choice and phase ratio on cellular toxicity and productivity is examined in batch suspension cultures. In general, the greater the miscibility of the solvent with the aqueous phase, the more cellular toxicity it exhibits. However, the presence of solvent at concentrations above the solubility limit showed no increased toxic effect over that achieved with saturation concentrations. Toxicity experiments indicate that of the solvents examined octane is the least toxic to the Curvularia lunata substance S biotransformation system under consideration. The production of hydrocortisone is determined to be approximately 20 times greater during the growth phase than during the stationary phase. The phase ratio of the organic solvent added has a significant effect on the productivity of the system. It was found that there is an increase in productivity with an increase in the phase ratio of the organic solvent added. Reaction kinetics are examined, and the increase in productivity with increasing amounts of organic solvent is attributed to the increase in concentration of the steroid reactant in the system.