The possibility that murein transglycosylase of Escherichia coli may function as an exoenzyme to cleave the murein sacculus in a systematic fashion was investigated. Two molecular species of this hydrolytic enzyme have been isolated and characterized: one is associated with the soluble fraction and the other with the envelope fraction of ruptured E. coli cells. The soluble enzyme was employed to digest murein sacculi that had been uniformly labeled with [3H]diaminopimelic acid. The analysis of the reaction product indicated that the enzyme did not cleave the glycan chains randomly. To determine whether transglycosylase released muropeptide first from the N-acetylglucosaminyl or the 1,6-anhydromuramyl ends of the glycan chains, the [3H]diaminopimelate-labeled sacculi were further radiolabeled at their N-acetylglucosaminyl ends with [14C]galactose by a galactosyl transferase reaction. The transglycosylase released galactose-labeled X + X′ muropeptides early during the course of digestion, suggesting exoenzymatic cleavage of the glycan chains preferentially from the N-acetylglucosaminyl ends. (X =N-acetylglucosaminyl-1,6-anhydro-N-acetylmuramyl-l-alanyl-d-γ-glutamyl-meso-diaminopimelic acid; X′= X-d-alanine.) The kinetics of the activity of the membrane-bound enzyme were found to be identical to that of the soluble enzyme, indicating that both molecular species of transglycosylase function as exoenzymes in vitro.