The influence of calcium alginate entrapment on the physiology of Mycobacterium sp. E3 is reported. As a model system the NADH-requiring conversion of propene to 1,2-epoxypropane in the presence and absence of glucose as co-substrate was selected. The cofactor-dependent reaction was used as a measure of the physiological status of the resting cells. Initial kinetic experiments established a system free from diffusional limitations. In the presence of glucose there were no differences between the physiology of the free and immobilized cells. The apparent differences observed in the absence of co-substrate were demonstrated to be caused by calcium ions and to a lesser degree alginate; the addition of calcium, alginate or calcium alginate beads containing no cells to the free cells gave similar data to that obtained with immobilized cells. The results presented highlight the high concentrations of calcium to which cells immobilized in calcium alginate beads can be exposed.