Abstract The cell-free extract of Streptomyces sp. KO-2388, an albonoursin-producing strain, was found to catalyze the conversion of cyclo( l-Phe– l-Leu) to albonoursin. The conversion activity was simply determined by measuring the increase in ultraviolet (UV) absorption of the reaction mixture at 317 nm, λ max ( ε 25,400) of albonoursin, where cyclo( l-Phe– l-Leu) had no absorption. The optimum pH and temperature of this bioconversion using the cell-free extract were determined to be pH 8.0–9.5 and 60°C, respectively. Under the optimum conditions, 620 mg/l of albonoursin was obtained with a conversion ratio of 62% after 24 h incubation.