Cells of Neurospora crassa strain 74A, grown on sucrose for 12 h and transferred to a medium containing protein as sole carbon source, would not produce exocellular protease in significant amounts. When a filtrate from a culture induced to make protease by normal growth on a medium containing protein as principal carbon source was added to an exponential-phase culture in protein medium, exocellular protease was made in amounts similar to those made during normal induction. The material in the culture filtrate that participated in the induction process was identified as protease by its heat lability, molecular weight, and the dependence of induction rate on units of proteolytic activity added to the exponential-phase culture. Induction of the formation of exocellular protease by exponential-phase cells appears to require a protein substrate, added proteolytic activity, and protein synthesis. The protease produced by induced exponential-phase cells was as efficient in promoting induction as normally induced enzyme, whereas constitutive intracellular enzyme was only 50% as efficient. The bacterial protease thermolysin was able to induce exocellular protease at 90.7% of the rate observed with added N. crassa exocellular protease.