The inoculation of Aspergillus flavus spores into a culture of Streptococcus lactis in Lablemco tryptone broth medium resulted in little or no aflatoxin accumulation even though the growth of the fungus was not hindered. The drop in pH and reduced nutrient levels in the medium as a result of the S. lactis growth were not the cause of the observed inhibition. The inhibition was not eliminated by the addition of carbohydrate equal to the amount used by the bacterium before the inoculation with the fungus. Aflatoxin levels were also markedly reduced when S. lactis was inoculated into a growing A. flavus culture. In addition to inhibiting the synthesis of aflatoxin, S. lactis also degraded preformed toxin. A. flavus, on the other hand, not only reduced the growth of S. lactis but also affected the morphology of the bacterial cell; the cells became elongated and formed long chains. S. lactis produced and excreted the inhibitor into the medium late in its growth phase. The inhibitor was a heat-stable low-molecular-weight compound. Chloroform extracts of A. flavus grown in the presence of S. lactis were toxic to Bacillus megaterium but did not exhibit mutagenic or carcinogenic activity in the Salmonella/mammalian microsome mutagenicity test.