The lipopeptide antibiotic surfactin is a potent extracellular biosurfactant produced by various Bacillus subtilis strains. Biosynthesis of surfactin was studied in a cell-free system prepared from B. subtilis ATCC 21332 and OKB 105, which is a transformant producing surfactin in high yield [Nakano, M. M., Marahiel, M. A., & Zuber, P. (1988) J. Bacteriol. 170, 5662-5668]. Cell material was disintegrated by treatment with lysozyme and French press. A cell-free extract was prepared by ammonium sulfate fractionation, which catalyzed the formation of surfactin at the expense of ATP. Lipopeptide biosynthesis required the L-amino acid components of surfactin and D-3-hydroxytetradecanoyl-coenzyme A thioester. D-Leucine which is present in surfactin was not utilized but inhibited the biosynthetic process. The structure of surfactin, synthesized enzymatically in vitro, was confirmed by chromatographic comparison with the authentic compound and by amino acid analyses. An enzyme fraction was prepared by gel permeation chromatography which catalyzed ATP/pyrophosphate exchange reactions dependent on the component amino acids of surfactin. This enzyme fraction was capable of binding substrate amino acids covalently, probably via thioester linkages. The formation of these intermediates was inhibited by various thiol blocking reagents and phenylmethanesulfonyl fluoride. De novo synthesis of the lipopeptide was not observed with this partially purified enzyme fraction most likely due to the lack of an acyltransferase activity required for linking the beta-hydroxy fatty acid to the peptide moiety.