Two derivative strains of Escherichia coli with high-level resistance to chloramphenicol, one carrying an episomal resistance factor and the other a chromosomal mutant, were both shown to be potent inactivators of the drug. When 1 mM chloramphenicol was added to an exponential culture in minimal medium, growth was halted until 85–90% of the drug was inactivated by acylation. At this state the drug was essentially monoacylated. During and after growth, esterification of the second alcoholic group occurred, though at a slower rate. Arylamines, in amounts up to 10% of chloramphenicol equivalents, were demonstrated in the growth medium after 1–3 days' incubation.With an acetateless mutant of Escherichia coli K12, carrying a resistance factor, it was shown that 5–6 moles of acetate was consumed for every mole of chloramphenicol acylated.Inactivation of chloramphenicol by Gram-negative organisms from infections in hospitalized patients was also examined. Among 103 strains susceptible to chloramphenicol, none produced considerable amounts of chloramphenicol esters. The same was the case with 14 resistant strains of Pseudomonas. Of 134 other resistant organisms examined, including strains of Escherichia, Proteus, Klebsiella, Salmonella, and Shigella, 133 were producers of chloramphenicol esters, and in most cases the drug was partly or entirely diacylated.