The important immunosuppressive agents FK 506 and ascomycin (1) have been the focus of intensive structure-activity relationship (SAR) studies, with FK 506 recently approved by the FDA for liver organ transplantation in the U.S. Due to the complexity of their structures, we initiated a microbial transformation program to modify chemically inaccessible sites. Previously, we reported microbial desmethylation, specific methylation, and glucosylation of FK 506/ascomycin to obtain various derivatives that are difficult or tedious to synthesize chemically. In this study, we describe the specific hydroxylation of the 19-methyl group of ascomycin by Streptomyces sp. MA 6870 (ATCC No. 55281), leading to a novel hemiketal structure (2). The structure of 2 was characterized using FAB mass spectrometry (showing an M+Li ion of 814, consistent with a hydroxylated derivative) and 1H/13C NMR (revealing the absence of the H-19 methyl signal, loss of the C-22 carbonyl signal, and appearance of signals corresponding to a hemiketal carbon and hydroxylated C-19). The immunosuppressive activity of 2 was evaluated in an in vitro T cell proliferation assay, yielding an IC50 of 3 nM (compared to 0.8 nM for parent compound 1) and retaining 35% of the biological activity of 1.