A highly vancomycin-resistant mutant (MIC = 100 microg/ml) of Staphylococcus aureus, mutant VM, which was isolated in the laboratory by a step-pressure procedure, continued to grow and synthesize peptidoglycan in the presence of vancomycin (50 microg/ml) in the medium, but the antibiotic completely inhibited cell wall turnover and autolysis, resulting in the accumulation of cell wall material at the cell surface and inhibition of daughter cell separation. Cultures of mutant VM removed vancomycin from the growth medium through binding the antibiotic to the cell walls, from which the antibiotic could be quantitatively recovered in biologically active form. Vancomycin blocked the in vitro hydrolysis of cell walls by autolytic enzyme extracts, lysostaphin and mutanolysin. Analysis of UDP-linked peptidoglycan precursors showed no evidence for the presence of D-lactate-terminating muropeptides. While there was no significant difference in the composition of muropeptide units of mutant and parental cell walls, the peptidoglycan of VM had a significantly lower degree of cross-linkage. These observations and the results of vancomycin-binding studies suggest alterations in the structural organization of the mutant cell walls such that access of the vancomycin molecules to the sites of wall biosynthesis is blocked.