Teicoplanin, a new glycopeptide antibiotic belonging to the same family as vancomycin, inhibits cell wall synthesis in Bacillus subtilis; the inhibition is accompanied by an intracellular accumulation of UDP-N-acetyl-muramyl-pentapeptide. A cell-free system from Bacillus stearothermophilus, capable of synthesizing peptidoglycan, is 50% inhibited by teicoplanin at 40 micrograms/ml and 100% inhibited at 100 micrograms/ml; suppression of peptidoglycan synthesis is accompanied by parallel accumulation of the lipid intermediate. Teicoplanin binds to cell walls and forms a complex with N,N'-diacetyl-L-lysyl-D-alanyl-D-alanine. The association constant of this complex is 2.56 X 10(6) liters mol-1, calculated by spectrophotometric titration. The mechanism of action of teicoplanin is discussed in comparison with those of other inhibitors of cell wall biosynthesis, namely, vancomycin, ristocetin, and gardimycin.