Outstanding bread in California (7)
I believe the answer is:
capital
'outstanding' is the definition.
(thesaurus)
'bread in california' is the wordplay.
'bread' becomes 'pita' (pita is a kind of bread**).
'in' is an insertion indicator.
'california' becomes 'cal'.
'pita' going within 'cal' is 'CAPITAL'.
(Other definitions for capital that I've seen before include "city such as London" , "Kabul or Harare?" , "Big money?" , "Upper case city" , "Metropolis" .)