Plasmid pPS96 was used to disrupt the genomic region immediately upstream of pcbC in C. acremonium by homologous integration. Approximately 4% of the C. acremonium transformants obtained with pPS96 were unable to produce beta-lactam antibiotics. All transformants obtained with other plasmids and isolates which had not been exposed to transforming DNA retained the ability to produce beta-lactams. Enzyme analysis showed that ACV synthetase activity was missing in the beta-lactam-minus pPS96 transformants. Southern copies of pPS96 in all beta-lactam-minus transformants analyzed. However, predictable alterations of the targeted region were not detected. Transformation of antibiotic-minus transformants with plasmid pZAZ4, carrying a wild-type copy of the region targeted for disruption, resulted in restoration of the ability to produce beta-lactams in greater than 80% of the transformants recovered. Location of the pcbAB gene upstream from pcbC was confirmed by comparing the amino acid sequence of internal peptides from purified ACV synthetase with that deduced from the DNA sequence of the region targeted for disruption. The direction of transcription of the pcbAB gene is opposite that of the pcbC gene. Further analysis of amino acid sequence data from ACV synthetase revealed regions of strong similarity with the peptide synthetases responsible for production of tyrocidine and gramicidin S in Bacillus brevis.