Lysates obtained from amoebocytes of Limulus polyphemus, the horseshoe crab, showed gel formation after the addition of bacterial endotoxin. In contrast to living gram-negative bacteria, viable gram-positive microorganisms did not cause gelation of lysate. Nevertheless, peptidoglycan isolated from the cell walls of various gram-positive organisms did induce the reaction. However, the activity of peptidoglycan was 1,000 to 400,000 times less than that of Escherichia coli lipopolysaccharide. After exposure to lysozyme, peptidoglycan no longer gelled amoebocyte lysate, therefore apparently excluding endotoxin contamination. Gelation of amoebocyte lysate by endotoxin or peptidoglycan was inhibited by different concentrations of sodium polystyrolsulfonate. Whereas these studies confirm the specificity of the Limulus test for bacterial endotoxins, they also indicate that other substances of bacterial origin should be investigated for their ability to gel amoebocyte lysate.