A biotransformation procedure, using the filamentous fungus Cunninghamella echinulata NRRL 1384, for the high yielding regioselective demethylation of a thebaine derivative to give intermediates for the synthesis of buprenorphine is reported. The thebaine derived substrate can be converted to a mixture of N-demethylated and NO-demethylated products. Manipulation of the growth conditions of the organism and time of substrate addition resulted in a optimised conversion to the N-demethylated compound of 94%. The underlying enzymatic basis for this process is investigated and a pathway for the formation of these two products is proposed. (C) 2003 Elsevier Inc. All rights reserved.