In an enzymatic synthesis of cephalexin (CEX) using an acylase from Xanthomonas citri, the effect of polyethylene glycol (PEG) on the synthetic reaction of Zamino-3-deacetoxycephalosporanic acid (FADCA) and D-alpha-phenylglycine methyl ester (PGM) to CEX was investigated. The addition of PEG (MW 300-20,000) increased the yield significantly. This yield enhancement effect tended to increase with the increasing molecular weight of PEG. Addition of PEG to the reaction system did not affect both the CEX and PGM hydrolytic reactions. The PEG added to the reaction medium used in these experiments did not depress the water activity significantly, and the product yield improvement could not be explained by the water activity alone. The PEG stabilized the enzyme activity to some extent, but this stabilizing effect was only partially attributable to the yield enhancement of CEX. The enhancing effect of PEG on the synthetic yield increased with the increasing PEG molecular weight or the length of the poly(oxy-1,2-ethanediyl) chain, which increases the hydrophobicity of PEG. This finding consequently has led to the conclusion that the PEG structure renders the affinity between enzyme and 7-ADCA, which is a hydrophobic substrate. The microenvironmental hydrophobicity of PEG and its interaction with the hydrophobic substrate was found to be the main reason for the improvement of the CEX yield. In fact, the Michaelis-Menten kinetic constant for ZADCA, K7.ADcA. in the presence of PEG was smaller than that in the control system (without PEG addition).