Subtilisin from Bacillus subtilis was modified with polyethylene glycol (PEG), or adsorbed either on celite or porous glass, or directly used as a suspended powder to catalyse peptide synthesis and transesterification reactions in organic solvents. The rather low yield of peptide synthesis probably resulted from the enzyme tendency to catalyse hydrolysis and transesterification side reactions. The kinetics of transesterification catalysed by PEG-subtilisin was consistent with a ping-pong mechanism modified by a hydrolytic branch. Initial rates of transesterification were found to be dependent on alcohol and organic base concentrations in the reaction mixture. The high affinity of benzyloxycarbonyl-L-serine-methyl ester as compared to benzyloxycarbonyl-L-phenylalanine-methyl ester for the enzyme indicated that a change in substrate specificity of subtilisin occurred in organic phase. The 50-fold increase in the rate of synthesis of benzyloxycarbonyl-L-serine-Lphenylalanine amide which was observed when PEGsubtilisin was used instead of immobilized or powdered enzyme, suggested that a higher flexibility of the polypeptide chain modified by the covalent attachment of a number of soluble PEG moieties occurred in organic solvents. This also resulted in a lower stability of PEGsubtilisin at high temperature.