Microbial transglutaminase (TGase) from Streptomyces mobaraensis (MTG) has been used in many industrial applications because it effectively catalyzes the formation of covalent cross-linking between glutamine residues in various substrate proteins and lysine residues or primary amines. To better understand the sequence preference around the reactive glutamine residue by this enzymatic reaction, we screened preferred peptide sequences using a phage-displayed random peptide library. Most of the peptides identified contained a consensus sequence, which was different from those previously found for mammalian TGases. Of these, most sequences had a specific reactivity toward MTG when produced as a fusion protein with glutathione-S-transferase. Furthermore, the representative sequence was found to be reactive even in the peptide form. The amino acid residues in the sequence critical for the reactivity were further analyzed, and the possible interaction with the enzyme has been discussed in this paper.