Highly efficient production is discussed of nootkatone, the most important fragrant component of grapefruit and which possesses anti-obesity activity, from valencene, obtained from Valencia orange, by the green alga, Chlorella, and the fungi, Mucor, Botryospaeria and Botryodiplodia. The microorganisms introduce an oxygen atom at an allylic position to give secondary hydroxyl and keto groups. The presented methods are a cheap one step reaction, non-hazardous and very useful for the production of fragrant components from commercially available natural sesquiterpene hydrocarbons.