Rhizobium meliloti adapts to environments of high osmolarity by accumulating glutamate, trehalose, and the dipeptide N-acetylglutaminylglutamine amide (NAGGN) intracellularly. In this study, the mechanism of NAGGN production and accumulation was examined. NAGGN was produced in osmotically shocked cultures after a lag period of more than one hour, and NAGGN was undetectable in cultures treated with chloramphenicol, indicating that genetic induction is required for NAGGN accumulation. In vitro radiolabeling experiments demonstrated that the peptide synthesis step in NAGGN production did not occur ribosomally. Rather, it was catalyzed by an ATP-dependent enzyme that appeared to be both induced by high osmolarity and activated by K+. Also, a mutant analysis suggested that NAGGN may be partly responsible for the osmotic tolerance observed in R. meliloti. 36% of mutants that were characterized as osmotically sensitive compared to the parent strain, were also found to contain reduced levels of. NAGGN. The phenomenon of osmolyte accumulation as it relates to adaptation to other environmental stresses is discussed.