The ${eta}$-lactamase inhibitory protein, BLIP-II, found in the culture supernatant of Streptomyces exfoliatus SMF19, shows no discernible sequence identity with other ${eta}$-lactamase inhibitory proteins identified in Streptomyces spp. A null mutant of the gene encoding BLIP-II (bliB::$hyg^r$) showed a bald appearance on solid media. Although BLIP-II was initially isolated from the supernatant of submerged cultures, sites of BLIP-II accumulation were seen in the cell envelope. Mutation of bliB was also associated with changes in the formation of septa and condensation of the chromosomal DNA associated with sporulation. The bliB mutant exhibited infrequent septa, showing dispersed chromosomal DNA throughout the mycelium, whereas the condensed chromosomes of the wild-type were separated by regularly spaced septa giving the appearance of a string of beads. Therefore, on the basis of these results, it is suggested that BLIP-II is a regulator of morphological differentiation in S. exfoliatus SMF19.