In the course of work on the formation of penicillins and cephalosporins¹ we have examined cultures of β-lactam producing strains for the presence of metabolites biosynthetically related to these antibiotics. Here we report the isolation and structure of a dihydro[1,3]thiazine lactone (1) from a cephalosporin C (2) producing strain of Cephalosporium acremonium. Its structure was determined by X-ray diffraction. The formation of (1) from (2) or a related metabolite is discussed.