A23187 is an ionophore antibiotic that forms dimeric complexes with divalent cations such an Mn2+ and Ca2+. Over 200 randomly selected soil microorganisms were incubated with A23187. None of these cultures was capable of transforming this compound. In contrast, many microorganisms were able to modify the methyl ester of A23187. The transformation products produced by one culture, Streptomyces chartreusis, were isolated and identified as 16-hydroxy-N-demethyl A23187 methyl ester, 16-hydroxy-A23187 methyl ester, and N-demethyl A23187 methyl ester. These ester derivatives lack most of the ionophore properties of the acids and cannot readily form dimeric complexes with divalent cations. However, they could be hydrolyzed by a mild treatment with ethanolic KOH to free acids that possess good ionophore activity. The use of the ester substrate in conjunction with the hydrolysis procedure is, at the present time, the only known method for microbiologically producing A23187 derivatives.