L-2-Methyltryptophan was found to be an intermediate in the biosynthesis of the antibiotic thiostrepton. It was isolated from growing cultures and resting cells of Streptomyces laurentii in trapping experiments after the application of labeled L-methionine or L-tryptophan. Its formation from L-tryptophan and S-adenosylmethionine was studied in a cell-free extract of S. laurentii. Although several attempts to purify the soluble methyltransferase by standard methods failed, some of its characteristics could be determined in the crude extract. The enzyme has a sharp pH optimum at pH 7.8. The apparent Km value for S-adenosylmethionine is 120 microM and the Ki value for S-adenosylhomocysteine is 480 microM. The enzyme is not stereoselective with respect to D- or L-tryptophan, but the D-isomer is converted at a slower rate than the L-isomer. Indolepyruvic acid is also methylated, while indole is not a substrate. The methyl group is transferred with retention of its configuration, contrary to most other methyltransferase reactions.