Micrococcus luteus produced a diffusible, esterase inhibitory factor (EIF) which inhibited the activity of cutaneous diphtheroid esterases on Tween 80–CaCl2 agar media. Esterases of Staphylococcus, Micrococcus, Bacillus, and Serratia were not susceptible. EIF did not appear to combine with the substrate or to prevent enzyme synthesis; it was unable to reverse the precipitation of calcium oleate. The composition of the medium, especially peptones, influenced the production of EIF. EIF was synthesized in the absence of diphtheroids, but production required the presence of Tween. The interaction was observed on agar medium of pH 5.5–8.5, at 25–43 °C, under an atmosphere of 10–20% CO2, in the presence of urea, but not after the addition of NaCl or dextrose. Supernatants of broth cultures had to be concentrated to detect EIF. Crude dialyzed and concentrated preparations of EIF withstood 60 °C for 60 min but were inactivated after 100 °C for 10 min. EIF may possibly be associated with a lipoid substance, since it did not precipitate in ethanol.