The final step in the biosynthesis of beta-lactam antibiotics in Penicillium chrysogenum and Aspergillus nidulans involves removal of the L-alpha-aminoadipyl side chain from isopenicillin N (IPN) and exchange with a nonpolar side chain. The enzyme catalyzing this reaction, acyl-coenzyme A:isopenicillin N acyltransferase (acyltransferase), was purified from P. chrysogenum and A. nidulans. Based on NH2-terminal amino acid sequence information, the acyltransferase gene (penDE) from P. chrysogenum and A. nidulans were cloned. In both organisms, penDE was located immediately downstream from the isopenicillin N synthetase gene (pcbC) and consisted of four exons encoding an enzyme of 357 amino acids (approximately 40 kilodaltons [kDa]). The DNA coding sequences showed approximately 73% identity, while the amino acid sequences were approximately 76% identical. Noncoding DNA regions (including the region between pcbC and penDE) were not conserved. Acyltransferase activity from Escherichia coli producing the 40-kDa protein accepted either 6-aminopenicillanic acid or IPN as the substrate and made a penicillinase-sensitive antibiotic in the presence of phenylacetyl coenzyme A. Therefore, a single gene is responsible for converting IPN to penicillin G. The active form of the enzyme may result from processing of the 40-kDa monomeric precursor to a heterodimer containing subunits of 11 and 29 kDa.