Compound PS-5, 3-(2-acetamidoethyl) thio-6-ethyl-7-oxo-1-azabicyclo [3.2.0] hept-2-ene-2-carboxylate (Fig. 1) is a new β-lactam antibiotic of the olivanic acid family with potent β-lactamase inhibitory properties1,2). As thienamycin3) (Fig. 1) was antimicrobially more active against some bacteria than acetylthienamycin4), deacetylated PS-5, 3-(2-aminoethyl) thio-6-ethyl-7-oxo-1-azabicyclo [3.2.0] hept-2-ene-2-carboxylate (abbreviated hereafter as NS-5; Fig. 1) seemed to be an interesting therapeutic agent as well as a useful intermediate compound for biological and chemical modification. So-called "facultative methanol-assimilating bacteria" are a group of Gram-negative organisms which have been isolated for utilization of methanol to produce single-cell protein5). In spite of decisive difference from Pseudomonas in the utilization pattern of carbon sources, they are tentatively included in Pseudomonas6). KAMEDA et al. reported that some pseudomonads which, although taxonomically unidentified, apparently belonged to Pseudomonas aeruginosa deacylated various N-acyl-L- and D-amino acids by action of L- and D-amino acid acylase activities7). The present paper describes deacetylation of PS-5 to NS-5 by L-amino acid acylase from porcine kidney and D-amino acid acylase from Streptomyces olivaceus8) but not by L-amino acid acylase from Aspergillus sp.10). Based on these findings, PS-5 deacetylating microbes were screened with PS-5, N-chloroacetyl-L-phenylalanine and N-chloroacetyl-D-valine among facultative methanol-assimilating bacteria. Most of the microbes tested were active and could be classified into two groups of L-acylase producers and L- & D-acylase producers. Pseudomonas sp. 1158 which deacetylated the three substrates was chosen for further study. Cells of the bacterium entrapped in polyacrylamide gel and its acylase activities immobilized on DEAE-Sephadex, as well as lyophilized cells and the crude extract of the organism, were found to be useful for conversion of PS-5 to NS-5.