Cell-free extracts prepared by sonication of Streptomyces clavuligerus cyclized delta-(L-alpha-aminoadipyl)-L-cysteinyl-D-valine (ACV) into a penicillin-type antibiotic. The antibacterial spectrum of this antibiotic suggested it was a mixture of isopenicillin N and penicillin N indicating that both cyclization and racemase activities were present. Cyclization activity was optimal in extracts prepared from 48 hours cultures. Extracts incubated at 20 degrees C produced antibiotic for 2 hours before activity ceased. Cyclization activity showed an absolute requirement for dithiothreitol (DTT) and O2 and was stimulated by ascorbic acid and FeSO4. No requirement for ATP was observed.