Vancomycin is the front-line therapy for treating problematic infections caused by methicillin-resistant Staphylococcus aureus (MRSA), and the spread of vancomycin resistance is an acute problem. Vancomycin blocks cross-linking between peptidoglycan intermediates by binding to the D-Ala-D-Ala termini of bacterial cell wall precursors, which are the substrate of transglycosylase/transpeptidase. We have characterized a cluster of seven genes (vanSRJKHAX) in Streptomyces coelicolor that confers inducible, high-level vancomycin resistance. vanHAX are orthologous to genes found in vancomycin-resistant enterococci that encode enzymes predicted to reprogramme peptidoglycan biosynthesis such that cell wall precursors terminate in D-Ala-D-Lac rather than D-Ala-D-Ala. vanR and vanS encode a two-component signal transduction system that mediates transcriptional induction of the seven van genes. vanJ and vanK are novel genes that have no counterpart in previously characterized vancomycin resistance clusters from pathogens. VanK is a member of the Fem family of enzymes that add the cross-bridge amino acids to the stem pentapeptide of cell wall precursors, and vanK is essential for vancomycin resistance. The van genes are organized into four transcription units, vanRS, vanJ, vanK and vanHAX, and these transcripts are induced by vancomycin in a vanR-dependent manner. To develop a sensitive bioassay for inducers of the vancomycin resistance system, the promoter of vanJ was fused to a reporter gene conferring resistance to kanamycin. All the inducers identified were glycopeptide antibiotics, but teicoplanin, a membrane-anchored glycopeptide, failed to act as an inducer. Analysis of mutants defective in the vanRS and cseBC cell envelope signal transduction systems revealed significant cross-talk between the two pathways.