Cell-free extracts were prepared from either freshly grown or spray-dried cells of Micrococcus luteus ATCC 4698 by treatment with deoxyribonuclease and lysozyme. These extracts converted o-succinylbenzoic acid (OSB) to 1,4-dihydroxy-2-naphthoic acid (DHNA) as shown by spectrophotofluorometric and radioactivity assays. The conversion required the presence of ATP, CoA, and Mg2+. By use of [2-14C]OSB, the simultaneous production of the spirodilactone form of OSB was also demonstrated. The two products formed from OSB was also demonstrated. The two products formed from OSB were further characterized by gas chromatography combined with mass spectrometry. The production of the spirodilactone was suppressed by the addition of a preparation of the enzyme DHNA synthase obtained from Mycobacterium phlei. (This enzyme catalyzes the conversion of a CoA derivative of OSB to DHNA.) On mild acid treatment, the M. luteus extracts retained the ability to produce spirodilactone but lost the ability to form DHNA. These results are interpreted to mean that an OSB-CoA derivative is an intermediate in the conversion of OSB to DHNA by M. luteus and that two enzymes are involved, one to form the OSB-CoA derivative and the second to carry out a cyclization reaction.