Isopenicillin N synthase (IPNS), a non-haem iron-dependent oxidase, catalyses the biosynthesis of isopenicillin N (IPN), the precursor of all penicillins and cephalosporins'. The key steps in this reaction are the two iron-dioxygen-mediated ring closures of the tripeptide delta-(L-alpha-aminoadipoyl)-L-cysteinyl-D-valin (ACV). It has been proposed that the four-membered beta-lactam ring forms initially, associated with a highly oxidized iron(rv)-oxo (ferryl) moiety, which subsequently mediates closure of the five-membered thiazolidine ring(2). Here we describe observation of the IPNS reaction in crystals by X-ray crystallography. IPNS.Fe2+.substrate crystals were grown anaerobically(3,4), exposed to high pressures of oxygen to promote reaction and frozen, and their structures were elucidated by X-ray diffraction. Using the natural substrate ACV, this resulted in the IPNS.Fe2+.IPN product complex. With the substrate analogue, delta-(L-alpha-aminoadipoyl)-L-cysteinyl-L-S-methyl-cysteine (ACmC) in the crystal, the reaction cycle was interrupted at the monocyclic stage. These mono- and bicyclic structures support our hypothesis of a two-stage reaction sequence leading to penicillin. Furthermore, the formation of a monocyclic sulphoxide product from ACmC is most simply explained by the interception of a high-valency iron-ore species.