1. The bacterium Acetobacter xylinum produces extracellular cellulose microfibrils that form a pellicle in the medium enmeshing the bacterial cells. These microfibrils may show some localized alignment, which can be seen as birefringence when the culture is viewed between crossed Polaroid sheets. 2. An increase in birefringence can be induced by the addition of small amounts of certain classes of lipids, particularly sterols, to the cultures. 3. A crude lipid extract from Acetobacter cells induced greatly increased birefringence when added to fresh cultures of this organism. 4. When the bacterial lipids were fractionated, most of the activity was recovered in a complex, polar lipid. The lipid is secreted into the medium during growth and is unstable. The non-saponifiable portion of this lipid is shown to be a 1:1 mixture of a saturated and a monounsaturated C(35) tetrahydroxy terpene with a hopane ring system in the accompanying paper by Förster et al. (1973). The saturated molecule is referred to as tetrahydroxybacteriohopane. 5. Tetrahydroxybacteriohopane is itself capable of inducing birefringence in cultures as is 22-hydroxyhopane, which was also isolated from the non-saponifiable fraction of the total lipids. 6. The mechanism of induction of birefringence (orientation of microfibrils) is not known. This is unlikely to be a specific effect, since all the above compounds are active (intact lipid, tetrahydroxybacteriohopane, 22-hydroxyhopane), as are other classes of lipid. It is suggested, however, that a common mechanism may be involved and that similar compounds may be concerned with control of microfibril alignment in the cells of higher plants.