Cross-linking experiments of skimmed bovine milk with bacterial transglutaminase isolated from Streptoverticillium mobaraense showed only some degree of formation of high-molecular-weight casein polymers. Studies on the nature of this phenomenon revealed that bovine milk contains an inhibitor of transglutaminase activity. Removal of the casein and whey proteins from the milk resulted in a protein-poor fraction that still inhibited transglutaminase activity at cross-linking of β-casein and in several activity assays of transglutaminase. The inhibitor was partially purified by column chromatography and appeared to be a heat labile low molecular weight component. Inhibition of transglutaminase activity was observed with microbial transglutaminase, plasma transglutaminase and guinea pig liver transglutaminase. The inhibiting activity was found in bovine, goat, sheep, and human milk, but could not be detected in horse milk.