Group A streptococcal cell wall fragments inhibited phagocytosis of unrelated particles by rabbit polymorphonuclear leukocytes and inhibited the growth of rabbit kidney cells in vitro. Activity was associated with the mucopeptide moiety. Whole streptococci or the cytoplasmic fraction were less effective than cell wall fragments. The cell wall fragments of group D streptococci, Bacillus megaterium, and Escherichia coli were inactive. The inhibition of phagocytosis illustrates one way in which microbial components may influence the immune response. The toxicity for tissue cultures of rabbit kidney cell monolayers was greatest during the phase of active cell division. This appears to be a direct toxic effect of cell wall fragments on mammalian cells and may be related to the in vivo injury previously reported for streptococcal cell walls.