Membrane suspensions prepared from Micrococcus luteus (sodonensis) in both the exponential and stationary phases of growth contained a transglycosidase activity capable of synthesizing linear peptidoglycan. Exponential-phase membranes also contained an N-acetylmuramyl-L-alanine amidase activity which degraded the peptidoglycan as it was formed. The product of this amidase was purified and found to be free pentapeptide. The amidase was specific for peptidoglycan and could not attack lower-molecular-weight substrates even though the susceptible bond was present. Crude cell wall preparations isolated from exponential-phase cells also contained high levels of amidase. This cell wall-bound amidase would preferentially degrade in vitro-synthesized peptidoglycan over its own cell wall. Amidase activity could be solubilized from both cell walls and membranes by Triton X-100 treatment, butanol extraction, or LiCl extraction. Both membrane- and cell wall-derived amidases, solubilized by LiCl extraction, appeared to be of high molecular weight (greater than 150,000). Once solubilized, these wall- and membrane-derived amidases could attack the cross-bridged peptidoglycan of purified native cell walls, whereas bound amidases could not.