Candida cloacae cells oxidize long-chain fatty acids to their corresponding dicarboxylic acids (dioic acids) at rates dependent on their chain length and degree of saturation. This is despite the well-known toxicity of the fatty acids. Among the saturated substrates, the oxidation is limited to lauric acid (C12). The addition of pristane (5% v/v), which acts as an inert carrier for the poorly water-soluble substrate, boosts the oxidation of lauric acid to a rate that is comparable to that of dodecane. When dissolved in pristane, myristic (C14) and palmitic (C16) acids are effective carbon sources for C. cloacae, but dioic acid production is very low. Media glucose concentration and pH also influence cell growth and productivity. After the glucose is depleted, oxidation is optimal at a low pH. A two-phase (pristane/water) reaction was tested in a 2-1 stirred tank bioreactor in which growth and oxidation were separated. A 50% w/w conversion of lauric acid (10 g/l) to dodecanedioic acid was achieved. The bioreactor also alleviated poor mass transfer characteristics experienced in shake Basks.