When dissolved oxygen (DO) was maintained at saturation level during batch fermentations of Streptomyces clavuligerus (NRRL 3585), the accumulation of the intermediate penicillin N was lowered while formation of the end product cephamycin C was increased relative to fermentations without DO control. The specific activity of the penicillin ring-expansion enzyme deacetoxycephalosporin C synthase (DAOCS) was increased 2.3-fold under oxygen saturated conditions, whereas the penicillin ring-cyclizing enzyme isopenicillin N synthase (IPNS) showed only a 1.3-fold increase. Thus oxygen derepression of DAOCS appears to be an important regulatory mechanism in the conversion of penicillin N to cephamycin C in S. clavuligerus. IPNS, an early acting enzyme in cephamycin C biosynthesis, and DAOCS, which acts late in the pathway, both disappeared from cell extracts at 60 h, just prior to cessation of cephamycin production.