A cell-free system capable of hydroxylating cinnamic acid to p-coumaric acid has been isolated from 10-day-oid cultures of Polyporus hispidus. The enzyme requires NADPH and FAD for maximum activity. Enzyme activity appears to be localized in the microsomal fraction with slight activity occurring in the mitochondrial fraction. The optimum pH for enzymatic activity is 7.5. This is the first report on any properties of this enzyme in a fungus. The enzyme differs from the known plant enzyme in its FAD requirement.