The Lambek calculus L provides a foundation for categorial grammar in the form of a logic of concatenation. But natural language is characterized by dependencies which may also be discontinuous. In this paper we introduce the displacement calculus D, a generalization of Lambek calculus, which preserves the good proof-theoretic properties of the latter while embracing discontinuiity and subsuming L. We illustrate linguistic applications and prove Cut-elimination, the subformula property, and decidability