The yield of periplasmic enzyme, penicillin amidase (PA), from E. coli ATCC 11105 is regulated at the post-translational level by two competitive processes-intracellular proteolysis of newly synthesised pre-pro-PA (ppPA) in the cytoplasm and membrane transport and maturation of ppPA. Intracellular proteolysis results in a significant loss in the yield of active PA. Immunochemical analysis were used to study the influence of the cultivation temperature, phenylacetic acid, and glucose on the proteolysis of the ppPA in the cytoplasm. An increase in glucose concentrations or temperature during the cultivation resulted in a significant loss of PA activity due to the increased rate of intracellular proteolysis of ppPA. Addition of phenylacetic acid reduced the intracellular proteolysis of ppPA and, as a consequence, increased the PA production. Taken together, these data explain a new aspect of regulation of active PA production in E. coli.