Recombinant Escherichia coil cells expressing D-hydantoinase were used as the biocatalysts for the production of N-carbamoyl-D-hydroxyphenylglycine from DL-p-hydroxyphenylhydantoin. Although high concentrations of DMSO could lead to enzyme denaturation, in the presence of 1.5% DMSO, the rate of product formation increased by more than 80% due to enhanced permeability of the cell membrane and increased substrate concentration. Reduced mass transfer resistance, achieved by the permeabilization of cell membrane with CTAB and glutaraldehyde, led to a 60% increase in the rate of production. However, in addition to causing a shift of optimal pH toward lower pH, permeabilization of the cell membrane resulted in reduced enzyme stability toward thermal and organic denaturation. Nevertheless, the stability of the D-hydantoinase of the recombinant cells toward pH, temperature and organic solvents can be significantly enhanced by immobilization. (C) 2000 Elsevier Science Ltd. All rights reserved.