The biotransformation of limonene and limonene oxide by the cyanobacterium, Synechococcus sp. PCC 7942, was investigated. (S)-(+)-Limonene was hydroxylated stereo- and regioselectively at its allylic position of the endocyclic C=C double bond by the cyanobacterial cells to its corresponding alcohol. The cells also showed the ability for the enantio- and stereoselective cleavage of the epoxide group of (1S,2R,4R)-limonene oxide to give (1S,2S,4R)-limonene-1,2-diol. The repetitive production of carveol from limonene was achieved using Ca2+-alginate-immobilized cyanobacterial cells.