To produce an active metabolite of Chlordiazepoxide by fungal biotransformation in an easy and economic way and also to develop microbial models for drug metabolism studies. Chlordiazepoxide is metabolized in the liver by CYP3A4 and forms major active metabolite N-desmethyl chlordiazepoxide. The focus of the study was to explore the ability of six distinct fungi to biotransform the drug Chlordiazepoxide to its metabolites. Induction, Inhibition and kinetic studies were also conducted to find out the type and capability of enzyme involved in fungal biotransformation. The screening studies were performed and fermentation protocol was designed with two controls (culture control and drug control) and one sample. Extract metabolite samples were reconstituted and analysed using HPLC. Induction, Inhibition studies were conducted similarly by maintaining its respective controls using CYP3A4 inducer (Carbamazepine) and inhibitor (Fluoxetine), further kinetic studies were performed to find Km and Vmax of fungal biotransformation of Chlordiazepoxide. Among six organisms Aspergillus ochreus has shown an extra peak at 6.9 min. in HPLC when compared with its controls indicated the formation of metabolite. The metabolite thus formed was identified, isolated and structure was confirmed by mass spectrometry and NMR spectroscopy as Nor-chlordiazepoxide. During inhibition and induction studies, it was found that quantity of the metabolite was increased with inducer and decreased with inhibitor. The Km and Vmax of fungal metabolism of Chlordiazepoxide was 1.928 µg/ml and 0.1802 µg/ml/hr respectively. Aspergillus ochreus has the ability to biotransform the Chlordiazepoxide to its active metabolite by CYP3A4 like enzyme and it followed Michaelis-Menten kinetics.