An actinomycete strain IBL-14 isolated from soil by utilizing diosgenin as the sole carbon and energy source was identified as Streptomyces virginiae. S. virginiae IBL-14 can transform diosgenin to isonuatigenone. To our knowledge, this is the first reported case of producing rare nuatigenin-type spirosteroid (isonuatigenone) from pyrano-spirosteroid (diosgenin) by microbial transformation. From diosgenin to isonuatigenone, the pathway has been confirmed in this study that diosgenin was first converted to diosgenone, and then diosgenone was transformed to isonuatigenone by the C25 tertiary hydroxylation reaction. It appeared to be favorable to accumulate isonuatigenone when diosgenin was added to the onset of the stationary phase of cell growth, and the yield of isonuatigenone was about 28.4% during 48 h from 1.5 mM diosgenin. The C25 tertiary hydroxylation of diosgenone by S. virginiae IBL-14 is a novel and interesting reaction and will be a practical tool in producing natural nuatigenin-type steroids.