The Staphylococcus aureus accessory gene regulator (agr) is a peptide signalling system that regulates the production of secreted virulence factors required to cause infections. The signal controlling agr function is a 7-9 residue thiolactone-containing peptide called an autoinducing peptide (AIP) that is biosynthesized from the AgrD precursor by the membrane peptidase AgrB. To gain insight into AgrB and AgrD function, the agrBD genes were mutagenized and screened for deficiencies in AIP production. In total, single-site mutations at 14 different residues in AgrD were identified and another 20 within AgrB. In AgrD, novel mutations were characterized in the N-terminal leader and throughout the central region encoding the AIP signal. In AgrB, most mutations blocked peptidase activity, but mutations in the K129–K131 residues were defective in a later step in AIP biosynthesis, separating the peptidase function from thiolactone ring formation and AIP transport. With the identification of residues in AgrB essential for AgrD processing, we reevaluated the membrane topology and the new model predicts four transmembrane helices and a potential re-entrant loop on the cytoplasmic face. Finally, co-immunoprecipitation studies indicate that AgrB forms oligomeric structures within the membrane. These studies provide further insight into the unique structural and functional properties of AgrB.