The mechanisms of compartmentalization of intermediates and secretion of penicillins and cephalosporins in β-lactam antibiotic-producing fungi are of great interest. In Acremonium chrysogenum, there is a compartmentalization of the central steps of the CPC (cephalosporin C) biosynthetic pathway. In the present study, we found in the 'early' CPC cluster a new gene named cefP encoding a putative transmembrane protein containing 11 transmembrane spanner. Targeted inactivation of cefP by gene replacement showed that it is essential for CPC biosynthesis. The disrupted mutant is unable to synthesize cephalosporins and secretes a significant amount of IPN (isopenicillin N), indicating that the mutant is blocked in the conversion of IPN into PenN (penicillin N). The production of cephalosporin in the disrupted mutant was restored by transformation with both cefP and cefR (a regulatory gene located upstream of cefP), but not with cefP alone. Fluorescence microscopy studies with an EGFP (enhance