The three-dimensional structure of a penicillin-sensitive D-alanyl-carboxypeptidase-transpeptidase has been determined by x-ray crystallography to a resolution of 2.8 angstroms. The site of binding of the beta-lactam antibiotics penicillin and cephalosporin has been located. These findings constitute direct observation of the interaction of beta-lactams with a transpeptidase enzyme and establish the feasibility of defining the molecular stereochemistry of this interaction for purposes of drug design.