Bacillus sp. Z018, a novel strain producing epoxide hydrolase, was isolated from soil. The epoxide hydrolase catalyzed the stereospecific hydrolysis of (R)-phenyl glycidyl ether to generate (R)-3-phenoxy-1,2-propanediol. Epoxide hydrolase from Bacillus sp. Z018 was inducible, and (R)-phenyl glycidyl ether was able to act as an inducer. The fermentation conditions for epoxide hydrolase were 35 degrees C, pH 7.5 with glucose and NH4Cl as the best carbon and nitrogen source, respectively. Under optimized conditions, the biotransformation yield of 45.8% and the enantiomeric excess of 96.3% were obtained for the product (R)-3-phenoxy-1,2-propanediol.