The major constituent of the bacterial cell wall, peptidoglycan, is comprised of repeating units of N-acetylglucosamine (NAG) and N-acetylmuramic acid (NAM) with an appended peptide. Penicillin-binding proteins (PBPs) are involved in the final stages of bacterial cell wall assembly. Two activities for PBPs are the cross-linking of the cell wall, carried out by dd-transpeptidases, and the dd-peptidase activity, that removes the terminal d-Ala residue from peptidoglycan. The dd-peptidase activity moderates the extent of the cell wall cross-linking. There exists a balance between the two activities that is critical for the well-being of bacterial cells. We have cloned and purified PBP5 of Escherichia coli. The membrane anchor of this protein was removed, and the enzyme was obtained as a soluble protein. Two fragments of the polymeric cell wall of Gram-negative bacteria (compounds 5 and 6) were synthesized. These molecules served as substrates for PBP5. The products of the reactions of PBP5 and compounds 5 and 6 were isolated and were shown to be d-Ala and the fragments of the substrates minus the terminal d-Ala. The kinetic parameters for these enzymic reactions were evaluated. PBP5 would appear to have the potential for turnover of as many as 1.4 million peptidoglycan strands within a single doubling time (i.e., generation) of E. coli.