1. The strain M 5 al of Klebsiella pneumoniae grows excellently with starches. We were able to show that besides the pullulanase associated with the external membrane of the cells the bacterium produces an inducible, extracellular cyclodextrin glucanotransferase [1,4-alpha-D-glucan-4-alpha-(1,4-alpha-glucano)-transferase (cyclising) (EC 2.4.1.19)]. Potato starch and cyclohexaamylose or cycloheptaamylose were found to be the best "inducing" carbon sources for the synthesis of the enzyme. When the bacteria are grown batchwise, maltose is a poorly "inducing" carbon source; larger quantities of the enzyme are synthesized by continuous cultivation with maltose as growth limiting factor. 2. For the determination of the cyclodextrin glucanotransferase-activity an assay method wsa worked out. 3. The enzyme could be separated from the culture filtrate and purified to more than 90% in few steps. At a total yield of 61.2% related to the activity of the culture filtrate employed we received an enzyme solution with the specific activity of 26.6 units/mg protein. Some properties of the enzyme are described. 4. The products formed from amylopectin by the enzyme were analyzed. Somewhat more than half the amylopectin was found as cyclodextrins. 29.3% of the cyclodextrin fraction were cycloheptaamylose, 47.2% cyclohexaamylose and 10.7% exo-branched cyclohexaamylose. 12.8% of cyclohexaamylose were obtained from a cyclodextrin glucanotransferase-limit dextrin after debranching by pullulanase and exposing the product to the action of the glucanotransferase again. 5. The importance of the cyclodextrin glucanotransferase for the utilization of starches by this strain of Klebsiella pneumoniae is discussed. After a first characterization the enzyme is compared to the amylase of Bacillus macerans.