The natural product lactacystin exerts its cellular antiproliferative effects through a mechanism involving acylation and inhibition of the proteasome, a cytosolic proteinase complex that is an essential component of the ubiquitin-proteasome pathway for intracellular protein degradation. In vitro, lactacystin does not react with the proteasome; rather, it undergoes a spontaneous conversion (lactonization) to the active proteasome inhibitor, clasto-lactacystin beta-lactone. We show here that when the beta-lactone is added to mammalian cells in culture, it rapidly enters the cells, where it can react with the sulfhydryl of glutathione to form a thioester adduct that is both structurally and functionally analogous to lactacystin. We call this adduct lactathione, and like lactacystin, it does not react with the proteasome, but can undergo lactonization to yield back the active beta-lactone. We have studied the kinetics of this reaction under appropriate in vitro conditions as well as the kinetics of lactathione accumulation and proteasome inhibition in cells treated with lactacystin or beta-lactone. The results indicate that only the beta-lactone (not lactacystin) can enter cells and suggest that the formation of lactathione serves to concentrate the inhibitor inside cells, providing a reservoir for prolonged release of the active beta-lactone.