Steroid transformation is of great importance in the pharmaceutical industry. The major limiting factor in this process is the extremely poor solubility of steroids in aqueous media, which lowers their transformation rate and increases costs. This problem can be overcome by using organic-solvent-tolerant bacteria (OSTB), which can carry out the desired bioconversions in an organic-solvent-saturated system. OSTB are a relatively novel group of extremophilic microbes that have developed various adaptations to withstand solvent toxicity. The aim of this study was to isolate marine bacteria producing organic-solvent-stable cholesterol-transforming enzymes. A Bacillus species, BC1, isolated from Arabian Sea sediment was found to degrade cholesterol and exhibit excellent solvent tolerance particularly to chloroform. OSTB have tremendous potential in industrial processes involving nonaqueous biocatalysis and transformation in the presence of an organic phase.