Within the last few years, the quinoline alkaloids viridicatine (I), viridicatol (II) and 3-O-me thyl viridicatine (III) have been isolated from the mycelium and culture medium of Penicillium cyclopium Westling, Penicillium puberulum Bainier and Penicillium viridicatum Westling. Two further alkaloids found in the culture medium of P. cyclopium und P. viridicatum, cyclopenine (IV) and cyctopenol (V) are benzodiazepine derivatives. We have shown, using labelled precursors with P. viridicatum strain V41 and P. cyctopium strain SM72 that cyclopenine, cyclopenol, viridicatine and viridicatol are synthesised from anthranilic acid and phenylalanine. These results, together with the easy conversion of cyclopenine and cyclopenol into viridicatine and viridicatol respectively by means of acid or alkali, suggested that an in vivo relationship could exist between these two groups of alkaloids. in this paper we show that cyclopenine and cyclopenol are intermediates in the formation of viridicatine and viridicatol and that the transformation of the former to the latter is effected by an enzyme which we have named cyctopenase. This transformation occurs with fresh homogenised mycelium with dried lyophilised mycelium and with mycelium free extract, that with the dead mycelium being much faster than with the other preparations. Using the mycelium free extract it was shown that the "agent of activity" depends upon pH, is not dialysable and can be destroyed by heating at 60° for 3 min, thus indicating the enzymatic nature of the transformation. Additional products of the transformation are carbon dioxide and methylamine. Cyclopenase activity is shown to be strongest in the surface cultured mycelium of P. viridicatum, strain V41. In the surface cultured P. cyclopium, strain SM72 mycelium the activity was much tess and in the submerged culture of both strains practically no activity was detected. This agrees with the observation that, under normal conditions only P. viridicatum strain V41 produces an appreciable amount of viridicatine and viridicatol. These experiments, together with previous work, indicate that anthranilic acid and a phenylpropane (e.g. phenylalanine) combine to give the benzodiazepines, cyclopenine and cyclopenol and these are transformed by the enzyme cyclopenase to the quinoline derivatives viridicatine and viridicatol. The detailed mechanism of this transformation is being investigated. [ABSTRACT FROM AUTHOR]