These studies indicate that gamma-glutamylcyst(e)ine, found in the urine of a patient with gamma-glutamyl transpeptidase deficiency and also in the urine of experimental animals injected with glutathione or with inhibitors of gamma-glutamyl transpeptidase, is formed by the action of gamma-glutamyltranspeptidase. The evidence demonstrates that transpeptidation between glutathione and cystine occurs in vivo and also that this reaction constitutes a significant physiological function of the enzyme. The appearance of large amounts of gamma-glutamylcyst(e)ine in the urine seems to reflect an inhibitory effect of glutathione on the transport of gamma-glutamylcyst(e)ine into cells. The findings also indicate that conversion of glutathione to gamma-glutamylcysteine by hydrolytic cleavage of the COOH-terminal glycine moiety of glutathione (or analogous cleavage of glutathione disulfide) is not a quantitatively significant pathway. The results reported here show that gamma-glutamyl transpeptidase activity is not completely absent in a patient found to have a deficiency of this enzyme and that the activity of the enzyme is not abolished in experimental animals treated with potent gamma-glutamyl transpeptidase inhibitors.