The enzyme beta-lactam synthetase (beta-LS) catalyzes the formation of the beta-lactam ring in clavulanic acid, a clinically important beta-lactamase inhibitor. Whereas the penicillin beta-lactam ring is generated by isopenicillin N synthase (IPNS) in the presence of ferrous ion and dioxygen, beta-LS uses ATP and Mg2+ as cofactors. According to sequence alignments, beta-LS is homologous to class B asparagine synthetases (AS-Bs), ATP/Mg2+-dependent enzymes that convert aspartic acid to asparagine. Here we report the first crystal structure of a beta-LS. The 1.95 A resolution structure of Streptomyces clavuligerus beta-LS provides a fully resolved view of the active site in which substrate, closely related ATP analog alpha,beta-methyleneadenosine 5'-triphosphate (AMP-CPP) and a single Mg2+ ion are present. A high degree of substrate preorganization is observed. Comparison to Escherichia coli AS-B reveals the evolutionary changes that have taken place in beta-LS that impede interdomain reaction, which is essential in AS-B, and that accommodate beta-lactam formation. The structural data provide the opportunity to alter the synthetic potential of beta-LS, perhaps leading to the creation of new beta-lactamase inhibitors and beta-lactam antibiotics.