The factor present in normal human serum which inhibits growth of dematophytic fungi is characterized and identified. Serum inhibitory factor (SIF) is nondialyzable, heat stable at 56 degrees C. for 4 hours, and fungistatic. SIF was found to be an inhibitor of the dermatophyte genera Trichophyton, Microsporium, and Epidermophyton as well as the dimorphic yeast Candida albicans. SIF activity directly correlated with a serum's unbound iron-binding capacity (UIBC) in that lower UIBC'S were less inhibitory. Addition of iron to serum neutralized the inhibitory activity and this neutrilization was shown to be specific for iron since zinc, magnesium, managnese, and copper failed to alter serum inhibitory activity. Furthermore, addition of purified iron-free transferrin to a neutralized serum restored the SIF activity in parallel with the UIBC. Removal of transferrin from serum by affinity chromatography was confirmed by polyacrylamide gel electrophoresis and iron-binding assays. Transferrin-free serum produced by this procedure was shown to lack inhibitory activity. These data indicate that SIF is unsaturated transferrin and strongly suggests that it inhibits dermatophytes by binding iron which many organisms need for growth.