A phosphotransferase which modifies the alpha-glucosidase inhibitor acarbose by phosphorylation at its 7-position was isolated from the acarbose producer Actinoplanes sp. and purified to homogeneity. The sequence of the first 20 amino acids of the enzyme was determined. The enzyme is an ATP-dependent kinase and shows high specificity for acarbose and some related compounds containing the pseudodisaccharide moiety (acarviosin). The product formed by the enzyme, acarbose-7-phosphate, shows a significant lower inhibitory activity towards disaccharidases than acarbose itself. The acarbose producing organism contains a maltase which is inhibited by acarbose, but to a much lesser extent by acarbose-7-phosphate. The possible role of acarbose 7-phospho-transferase as part of a self-defense mechanism against acarbose in the producing organism is discussed.