The catalytic cycle of the ATP/Mg(2+)-dependent enzyme beta-lactam synthetase (beta-LS) from Streptomyces clavuligerus has been observed through a series of x-ray crystallographic snapshots. Chemistry is initiated by the ordered binding of ATP/Mg(2+) and N(2)-(carboxyethyl)-l-arginine (CEA) to the apoenzyme. The apo and ATP/Mg(2+) structures described here, along with the previously described CEA.alpha,beta-methyleneadenosine 5'-triphosphate (CEA.AMP-CPP)/Mg(2+) structure, illuminate changes in active site geometry that favor adenylation. In addition, an acyladenylate intermediate has been trapped. The substrate analog N(2)-(carboxymethyl)-l-arginine (CMA) was adenylated by ATP in the crystal and represents a close structural analog of the previously proposed CEA-adenylate intermediate. Finally, the structure of the ternary product complex deoxyguanidinoproclavaminic acid (DGPC).AMP/PP(i)/Mg(2+) has been determined. The CMA-AMP/PP(i)/Mg(2+) and DGPC.AMP/PP(i)/Mg(2+) structures reveal interactions in the active site that facilitate beta-lactam formation. All of the ATP-bound structures differ from the previously described CEA.AMP-CPP/Mg(2+) structure in that two Mg(2+) ions are found in the active sites. These Mg(2+) ions play critical roles in both the adenylation and beta-lactamization reactions.