Incubation of the unnatural tripeptide δ-(D-α-aminoadipyl)-L-cysteinyl-D-valine (DLD-ACV) with a partially purified extract of Cephalosporium acremonium resulted in the production of deacetoxycephalosporin C. The extract contained isopenicillin N synthetase (cyclase) and deacetoxycephalosporin C synthetase (expandase) but no penicillin epimerase activity, and was incubated aerobically in the presence of the components of the cyclase and expandase reaction mixtures (Fe⁺⁺, ascorbate, dithiothreitol, α-ketoglutarate and ATP). The reaction was sensitive to penicillinase, indicating penicillin N to be an intermediate. However, when ring expansion was prevented by omission of α-ketoglutarate and ATP, no penicillin N was detected.