The epsilon-caprolactone was obtained from cyclohexanone in high selectivity (99+%) by using whole-cell of fungus Fusarium oxysporum f. sp. ciceri NCIM 1282. The new oxidative activity of the fungus has been studied and potentiality of the biocatalyst towards high concentration of substrate has been investigated. Quite interestingly, present biocatalyst exhibits redox activity, first converting cyclohexanone to cyclohexanol followed by the formation of caprolactone. (C) 2002 Elsevier Science B.V. All rights reserved.