Biosynthesis of the lantibiotic peptide nisin by Lactococcus lactis NIZO R5 relies on the presence of the conjugative transposon Tn5276 in the chromosome. A 12-kb DNA fragment of Tn5276 including the nisA gene and about 10 kb of downstream DNA was cloned in L. lactis, resulting in the production of an extracellular nisin precursor peptide. This peptide reacted with antibodies against either nisin A or the synthetic leader peptide, suggesting that it consisted of a fully modified nisin with the nisin leader sequence still attached to it. This structure was confirmed by N-terminal sequencing and 1H-nuclear magnetic resonance analysis of the purified peptide. Deletion studies showed that the nisR gene is essential for the production of this intermediate. The deduced amino acid sequence of the nisR gene product indicated that the protein belongs to the family of two-component regulators. The deduced amino acid sequence of NisP, the putative product of the gene upstream of nisR, showed an N-terminal signal sequence, a catalytic domain with a high degree of similarity to those of subtilisin-like serine proteases, and a putative C-terminal membrane anchor. Cell extracts of Escherichia coli overexpressing nisP were able to cleave the nisin precursor peptide, producing active, mature nisin. A similar activation was obtained with whole cells but not with membrane-free extracts of L. lactis strains carrying Tn5276 in which the nisA gene had been inactivated. The results indicate that the penultimate step in nisin biosynthesis is secretion of precursor nisin without cleavage of the leader peptide, whereas the last step is the cleavage of the leader peptide sequence from the fully maturated nisin peptide.