Previously, the authors showed that activities of aminopeptidases, carboxypeptidases, alkaline phosphatase and esterase were located not only in cells but also on the cellular membrane of various mammalian cells, and succeeded in obtaining inhibitors against these enzymes from culture filtrates of actinomycetes (e.g., bestatin, amastatin, forphenicine, esterastin, ebelactones A and B) which had interesting biological activities. In screening inhibitors of alkaline phosphatase from bovine liver, a new inhibitor, alphostatin, was isolated from the culture filtrate of Bacillus megaterium BMG59-R2 (isolated from a soil sample). This communication reports the isolation, characterization and activity of alphostatin: Alphostatin was produced by shaking culture of strain BMG59-R2 in media with carbon sources (glycerol, glucose, etc.) and nitrogen sources (fish meal, etc.), with maximum production in 25-30 hours using a typical medium (glycerol 3.0%, casein 3.0%, etc.). It was purified via Diaion PK-216, activated carbon, DEAE-Sephadex A-25 column chromatographies, yielding a colorless crystalline powder. Its physicochemical properties included MP 203-205°C (dec), solubility in water and diluted hydrochloric acid (insoluble in acetone, benzene, ethyl acetate), positive Rydon-Smith, ninhydrin and acid molybdate reactions, single TLC spot (Rf 0.21), and cathode migration in paper electrophoresis. The structure was determined to be L-isoleucyl-L-isoleucyl-L-phosphoseryl-L-glutaminyl-L-glutamic acid (IC50 3.0×10⁻⁶ M). A synthesized partial peptide (L-isoleucyl-L-isoleucyl-L-phosphorylserine) had IC50 6.3×10⁻⁶ M, suggesting the L-glutamyl-L-glutamic acid moiety is not essential for activity. Alphostatin potently inhibited bovine liver alkaline phosphatase but not other phosphatases (from bovine intestine, human placenta, chicken intestine, Escherichia coli). At 100 μg/ml, it had no antimicrobial activity and low acute toxicity (no deaths in mice after iv injection of 250 mg/kg).