Incubation of purified human C′1 esterase with guinea pig or rat plasma or serum produced a smooth muscle stimulating activity with the following properties: a) contraction of guinea pig ileum which was made unresponsive after a few applications and which did not then respond to agar-anaphylatoxin; b) failure to contract guinea pig ileum previously desensitized to agar-anaphylatoxin or treated with an antihistaminic drug; c) degranulation of mast cells and release of histamine from guinea pig tissues; d) failure to contract rat uterus. These findings indicated that the activity liberated by C′1 esterase is related to anaphylatoxin. Generation was prevented by inactivation of C′1 esterase with DFP or partially purified serum inhibitor of C′1 esterase, prior heating of the serum at 56°C, the presence of salicylaldoxime or phlorizin, or by selective chelation of Mg++. A correlation between the formation of anaphylatoxin and complete consumption of hemolytic complement was also observed. These observations suggested that C′1 esterase generates anaphylatoxin by interaction with the complement system.