This thesis discusses the whole cell conversion of toxic, poorly water-soluble organic substrates, using as an illustrative example the specific hydroxylation of toluene to toluene cis-glycol (cis-1.2-dihydroxy-3-methylcyclohexa-3.5-diene) by Pseudomonas putida UV4. Toxic effects may be eliminated through the introduction of tetradecane (to partition toluene away from the biocatalyst) to give product concentrations of 20 - 50 g 1-1, in a two-liquid phase reactor. Previous, well documented, characterisation of the hydroxylation has given accurate limits for the aqueous toluene concentration (10[percent] - 40[percent] of aqueous phase toluene saturation, or 0.05 - 0.20 g 1-1). This need to control the aqueous phase toluene concentration is imperative for the effective reactor operation of toluene hydroxylation and provides an excellent model to study this class of reactions. The use of biocatalysts to carry out conversions where the reactants and/or products are either toxic and/or sparingly water soluble is of interest, since many industrially important chemicals fall into this category. One method of carrying out such a biotransformation is to introduce an organic phase, to act as a reservoir for the toxic reactant and to solubilise poorly water soluble reactants and/or products. The introduction of a second (organic) liquid phase forming a heterogeneous reaction medium, necessitates the reaction be performed in a stirred tank reactor, so that the phases are well mixed (or other configurations where high interfacial areas are developed). The formation of a stable emulsion is therefore an intrinsic problem with two-liquid phase biotransformations. This thesis describes how bioreactor and process conditions can affect and alleviate the problem of emulsion formation. In addition stability of the biocatalyst on exposure to the two-liquid phase system has been examined and. loss of dioxygenase activity has been recorded as a function of process conditions (harvesting and biocatalyst storage) and reactor conditions (phase ratio, agitation rate, aqueous phase biocatalyst concentration and organic phase toluene concentration). A hypothesis of the biocatalyst inactivation, a two-liquid phase biotransformation has been proposed. Operating windows have been used as an experimental tool to determine the interacting effects of process and reactor conditions on biocatalyst stability and emulsion formation. Further, this work suggests possible designs for the microbial hydroxylation of toluene in a two-liquid phase bioreactor, avoiding problems of reactant inhibition and emulsion formation. It reports that these principles can be applied to similar biotransformation operations.