Exposure of cotton fiber to cell-free filtrates obtained from certain culture media after the growth of microorganisms increases the degree of subsequent swelling of the fiber in NaOH solutions. The active agency in the filtrates is here termed " S factor." Its action is measured by a previously described alkali-centrifuge test [12]. With the fungus Myrothecium verrucaria, S factor was produced during growth in media which included any of several cellulose-containing materials but not in any of several media lacking in cellulose. This finding and related results suggest that S factor consists at least in part of an enzyme or enzymes of the cellulase complex. A simple and reliable method of preparing Myrothecium filtrates of uniform and high S activity is reported. Several properties of S factor in Myrothecium filtrates have been observed. It is operative over a wide pH range. A very considerable uptake of the factor from solution by cotton fiber and a major increase in alkali-centrifuge value of the fiber occur in 10 min. Strength losses take place much more slowly. S factor is moderately stable in sterile filtrates at room tempera ture. Filtrates may be stored in frozen condition or may be dried at 40°C and stored dry with little loss in activity. The active factor is precipitated by acetone and is inactivated by crystal line pepsin. Although partial inactivation of S factor by heat occurred in ¹/₂ hr. at temperatures of 60°C and higher, complete inactivation did not take place even at much higher temperatures, and easily measurable activity remained even after heating at 100°C for ¹/₂ hr. Autoclaving at 15 lbs. steam pressure for 15 min. caused complete inactivation. The same filtrates also exhibited resistance to complete cellulase inactivation by heat when tested by a carboxymethylcellulose- viscosity test for cellulase.