Transformation of salannin, an insecticidal C-seco limonoid was investigated using a fungal system, Cunninghamella echinulata. Salannin was efficiently converted into two metabolites, where the C-17 furan moiety was transformed into γ-hydroxybutenolide (salanninolide) and N-(2-hydroxyethyl)-α,β-unsaturated-γ-lactam (salanninactam) analogues. Present studies have indicated salanninolide to be a metabolite in the C-seco limonoid biosynthetic pathway.