AbstractCellulosimicrobium cellulans EB‐8‐4 was discovered by screening of microorganisms as a powerful catalyst for the regio‐ and stereoselective allylic hydroxylation of D‐limonene to (+)‐trans‐carveol that is a useful and valuable fragrance and flavour compound. Cells of strain EB‐8‐4 were easily obtained, demonstrated more than 99% regio‐ and stereoselectivity, showed a specific hydroxylation activity of 4.0 U/g cdw (cell dry weight), and accepted 62 mM D‐limonene without inhibition. The hydroxylation was possibly catalyzed by an nicotinamide adenine dinucleotide (NADH)‐dependent oxygenase involved in the degradation of aromatic ring during cell growth. 13.4 mM of (+)‐trans‐carveol were obtained by biohydroxylation of D‐limonene with resting cells of C. cellulans EB‐8‐4, thus being 11 times higher than that obtained with the best biocatalyst known thus far. High conversion and high yield were obtained in the biohydroxylation of 11.6 mM of D‐limonene with the resting cells as catalyst in a closed shaking flask, giving 10 mM of (+)‐trans‐carveol, and 0.30 mM of carvone as the only by‐product. Thus, a unique biocatalyst for the regio‐ and stereoselective allylic hydroxylation of D‐limonene and an efficient synthesis of natural identical (+)‐trans‐carveol by biohydroxylation have been developed.