The sulfatase of Cephalosporium acremonium is regulated by exogenous sulfur compounds, repressed in cells in 0.02 M sulfate, and derepressed in 5 × 10−4 M sulfate. Organic sulfur sources, such as cysteine, homocysteine, and methionine, derepress the enzyme in varying degrees while the latter amino acid is also required for maximum synthesis of the antibiotics cephalosporin C and penicillin N. Sulfatase-repressed cells transferred from sulfate to methionine-containing medium produce a high level of these antibiotics in the culture medium and a proportionate derepression of the sulfatase. Cycloheximide inhibits sulfatase derepression in cultures transferred from sulfate to methionine medium while having negligible effect on antibiotic synthesis. Mutant cultures of C. acremonium, with an increased potential to synthesize sulfur-containing antibiotics, have decreased ability to degrade methionine for other cellular requirements and sulfatase derepression is proportionately increased. The sulfatase is thus regulated by the biosynthesis of cephalosporin C and penicillin N at the expense of sulfur-containing compounds required for other cellular processes.