Catalysis of the reaction: limonene + NAD(P)H + H+ + O2 = NAD(P)+ + H2O + limonene-1,2-epoxide. Can use either (4S)-limonene or (4R)-limonene as substrate. NADPH can act instead of NADH, although more slowly.
(S)-limonene 1,2-monooxygenase activity