In Australia, the cotton bollworm, Helicoverpa armigera, has a long history of resistance to conventional insecticides. Transgenic cotton (expressing the Bacillus thuringiensis toxin Cry1Ac) has been grown for H. armigera control since 1996. It is demonstrated here that a population of Australian H. armigera has developed resistance to Cry1Ac toxin (275-fold). Some 70% of resistant H. armigera larvae were able to survive on Cry1Ac transgenic cotton (Ingard) The resistance phenotype is inherited as an autosomal semidominant trait. Resistance was associated with elevated esterase levels, which cosegregated with resistance. In vitro studies employing surface plasmon resonance technology and other biochemical techniques demonstrated that resistant strain esterase could bind to Cry1Ac protoxin and activated toxin. In vivo studies showed that Cry1Ac-resistant larvae fed Cy1Ac transgenic cotton or Cry1Ac-treated artificial diet had lower esterase activity than non-Cry1Ac-fed larvae. A resistance mechanism in which esterase sequesters Cry1Ac is proposed.