Hydroxylated steroids are important intermediates in the manufacture of clinically important medicines. Filamentous fungi play a vital role in steroid hydroxylation in industry, but they usually exhibit additional undesired hydroxylation activities. The lack of fungal molecular manipulation techniques hinders the development and application of efficient industrial hydroxylases. Therefore, for industrial production of hydroxylated steroids, it is increasingly necessary to obtain a more efficient biotransformation system with higher regio- and stereo-specific activities. In this study, we successfully developed an expression system for the Thanatephorus cucumeris CYP5150AP2 and its cognate cytochrome P450 reductase TcCPR in the engineered prokaryotic host, Mycolicibacterium neoaurum YS10 for 15α-hydroxylation of progesterone. Combined strategies were used to improve protein expression and product yield. Finally, the titer of 15α-OH progesterone reached 205.6 mg/L (with 500 mg/L progesterone as the substrate) using N-terminal sequence of MnCYP2 and CP6 promoter at 25 ℃. This is the first time a fungal P450 system was successfully functionally reconstituted in Mycolicibacterium neoaurum and significantly optimized to produce hydroxylated progesterone utilizing combinatorial optimization strategies. This work further confirmed the superiority of utilizing Mycolicibacteria as cell factories for hydroxylated steroids production via expression of eukaryotic cytochrome P450s in comparison to E. coli.