Streptomyces griseus S 104 was sensitive to streptomycin during exponential growth in a medium which, in the subsequent stationary phase, supported production of the antibiotic in yields above 200 mug/ml. When antibiotic production began cultures developed a tolerance toward their lethal metabolite. This was not due to an increase in pH associated with antibiotic production, since pH effects on streptomycin sensitivity in S. griseus were in the reverse direction. However, the degree of tolerance was directly related to the amount of cell material present. Streptomycin production caused no change in the proportion of resistant variants in the population, nor did it cause the severe inhibition of protein synthesis observed in non-producing cultures exposed to the antibiotic. The lack of an effect on protein synthesis is attributed to the absence of streptomycin with in the cytoplasm since soluble extracts from mycelium harvested in the production phase were inactive when bioassayed immediately after cell disruption. However, they developed antibacterial activity rapidly when heated, and more slowly when incubated at 25 degrees C. The addition of phosphatase inhibitors during incubation prevented the appearance of antibiotic activity, and it was concluded that a small amount of streptomycin phosphate is present in the mycelium during antibiotic production. Differences in (14C) streptomycin uptake suggested that the mycelium was appreciably less permeable to the antibiotic in the production phase than during exponential growth. However, a small amount was taken up and much of it was in the soluble fraction of disrupted cells. Bioassays showed that this 14C-labeled antibiotic within the cells had been partially inactivated, suggesting that conversion of streptomycin to an inactive derivative is involved in the mechanism which protects the organism from its metabolite.