Activity of the enzyme glutaminyl-peptide--glutamylyl-transferase (EC 2.3.2.13; transglutaminase), which forms the interpeptidic cross-link N epsilon-(gamma-glutamic)-lysine, was demonstrated in cell-free extracts obtained from both the yeast like and mycelial forms of Candida albicans. Higher levels of enzymatic activity were observed in the cell wall fraction, whereas the cytosol contained only trace amounts of activity. Cystamine, a highly specific inhibitor of the enzyme, was used to analyze a possible role of transglutaminase in the organization of the cell wall structure of the fungus. Cystamine delayed protoplast regeneration and inhibited the yeast-to-mycelium transition and the incorporation of proteins into the cell wall. The incorporation of covalently bound high-molecular-weight proteins into the wall was sensitive to cystamine. Proteic epitopes recognized by two monoclonal antibodies, one of which is specific for the mycelial walls of the fungus, were also sensitive to cystamine. These data suggest that transglutaminase may be involved in the formation of covalent bonds between different cell wall proteins during the final assembly of the mature cell wall.