Systematic screening of microbial fermentation products has yielded a variety of enzyme inhibitors, some of which have been found to be clinically useful as anti-ulcer agents, immunomodulators and/or anticancer agents. In the course of testing microbial metabolites for inhibition of leucine aminopeptidase (LAP), a strain of Bacillus circulans (No. J725-B93) was found to produce a new compound designated as Bu-2743E, which showed potent LAP inhibitory activity with no antimicrobial activity. Bu-2743E exhibited characteristic UV absorption at 249.5 and 315 nm, and its structure was determined to be (2,3-dihydroxybenzoyl)-L-alanyl-Lthreonine (Fig. 1). This paper describes fermentation, isolation, properties and structure of Bu-2743E.