Microbial transformation of chlormadinone acetate to delmadinone acetate was investigated using free and immobilized cells of Arthrobacter simplex ATCC 6946 and Bacillus sphaericus ATCC 13805 in liquid–liquid biphasic system and a liposomal medium. For liquid–liquid biphasic system, n-decane, n-octanol, chloroform and butyl acetate were used as organic solvents. In liposomal medium, chlormadinone acetate was entrapped in liposomes composed of phosphatidylcholine and cholesterol. For both immobilized and free suspension biocatalysts, yields were higher in the aqueous medium compared to in liquid–liquid biphasic media. In all cases, the highest yields were obtained in the aqueous system. For the aqueous medium, a product yield of ∼48% was attained at 3h using the free suspension A. simplex cells. The aqueous medium afforded ∼47% product yield at 48h when freely suspended B. sphaericus was used.