Studies are reported showing that recombinant P450c17, coexpressed with rat NADPH-P450 reductase or expressed as a fusion protein containing the domain of the P450 linked to the domain of NADPH-P450 reductase, function effectively in intact Escherichia coli cells. Progesterone is rapidly hydroxylated by transformed E. coli cells at rates as rapid as 50 nmol of steroid hydroxylated/min/nmol of P450 at 37 degrees C. This rate measured in vivo equals or exceeds the best rates we have measured when reconstituting progesterone hydroxylase activity in vitro using purified recombinant bovine P450c17 and purified recombinant rat NADPH-P450 reductase. The limits imposed in vivo by the availability of reducing equivalents (NADPH) and molecular oxygen are identified by showing the nearly fivefold increase in hydroxylation activity when glucose is present and the tendency for the constitutive respiratory activity of E. coli to limit the availability of oxygen required for the P450-catalyzed reaction. The rate of progesterone metabolism is about 200 times faster by P450c17 coexpressed with NADPH-P450 reductase than when P450c17 functions with the constitutive electron transfer system of E. coli (flavodoxin and flavodoxin reductase). Expression of the fusion protein, termed rF450[mBov17A/mRatOR]L1, results in a rate of progesterone metabolism in vivo at 37 degrees C of about 15 nmol of steroid hydroxylated/min/nmol of P450. Pregnenolone is actively metabolized to dehydroepiandrosterone at rates similar to those seen when the P450 activity is reconstituted in vitro with cytochrome b5. Experiments are described showing that the limited solubility of progesterone in water imposes a limit on the extent of steroid hydroxylated. The practicality of this type of P450-containing system for the bioconversion of large amounts of a chemical for the manufacture of speciality chemicals is discussed.