Maier et al. have recently reported the conversion of elymoclavine to ergotamine and ergosine with cell-free extracts from peptide alkaloid-producing strains of Claviceps purpurea with a 0.3% conversion rate. In this study, the efficient conversion of elymoclavine to paspalic acid catalyzed by a particulate fraction from an ergotamine-producing strain Claviceps sp. PCCE1 is reported. The particulate fraction was incubated with [14C] elymoclavine and NADPH, with a maximum conversion rate of [14C] elymoclavine to [14C] paspalic acid of 95%, and NADPH was required. The conversion rate of the particulate fraction from Claviceps sp. SD 58, which accumulates elymoclavine, was less than 4%. Inhibitor experiments showed that CO and p-hydroxymercuribenzoate inhibited the activity by 94%, SK & F 525A by 50%, cyanide by 0%, and iodoacetamide by 21%. A second radioactive product partially separated from elymoclavine was observed with short incubation times (less than 35 min) or with added CO, Sk & F 525A, or cyanide, and its identification is in progress. It is proposed that the particulate system from Claviceps sp. PCCE1 contains enzymes involved in the conversion of elymoclavine to the lysergyl moiety of the peptide alkaloids, and further studies are planned to characterize these enzymes.