The roles of cytochrome P450 monooxygenases (CYPs) from Streptomyces spp. which are called the "treasure islands" for natural products for medicine and antibiotics are not well understood. Substrate specificity studies on CYPs may give a solution for elucidation of their roles. Based on homology sequence information, the CYP105D7 of a soluble cytochrome P450 known as heme protein from Streptomyces avermitilis MA4680 was expressed using the T7 promoter of the bacterial expression vector pET24ma, over-expressed in Escherichia coli system and characterized. An engineered whole cell system for daidzein hydroxylation was constructed using an exogenous electron transport system from ferredoxin reductase (PdR) and ferredoxin (Pdx). Also, an in vitro reaction study showed the purified CYP105D7 enzyme, using NADH-dependent-reducing equivalents of a redox partner from Pseudomonas putida, hydroxylated daidzein at the 3' position of the B ring to produce 7,3,'4' trihydroxyisoflavone. The hydroxylated position was confirmed by GC-MS analysis. The turnover number of the enzyme was 0.69 μmol 7,3,'4'-trihydroxyisoflavone produced per μmol P450 per min. This enzyme CYP105D7 represents a novel type of 3'-hydroxylase for daidzein hydroxylation. A P450 inhibitor such as coumarin significantly (ca.98%) inhibited the daidzein hydroxylation activity.