Streptomycetes are soil bacteria that differ from the genetically well-known Escherichia coli in two striking characteristics. (1) Instead of consisting of an alternation of growth and fission of morphologically simple, undifferentiated rods, the streptomycete life cycle involves the formation of a system of elongated, branching hyphae which, after a period of vegetative growth, respond to specific signals by producing specialized spore-bearing structures. (2) The streptomycetes produce an unrivalled range of chemically diverse 'secondary metabolites', which we recognize as antibiotics, herbicides and pharmacologically active molecules, and which presumably play an important role in the streptomycete life cycle in nature. This 'physiological' differentiation is often temporally associated with the morphological differentiation of sporulation and there are common elements in the regulation of the two sets of processes. In the model system provided by Streptomyces coelicolor A3(2), the isolation of several whole clusters of linked antibiotic biosynthetic pathway genes, and some key regulatory genes involved in sporulation, has made it possible to study the basis for the switching on and off of particular sets of genes during morphological and 'physiological' differentiation. Genetic analysis clearly reveals a regulatory cascade operating at several levels in a 'physiological' branch of the differentiation control system. At the lowest level, within individual clusters of antibiotic biosynthesis genes are genes with a role as activators of the structural genes for the pathway enzymes, and also resistance genes. It is attractive to speculate that the latter play a dual role: protecting the organism from self-destruction by its own potentially lethal product, and forming an essential component of a regulatory circuit that activates the biosynthetic genes, thus ensuring that resistance is established before any antibiotic is made. A next higher level of regulation is revealed by the isolation of mutations in a gene (afsB) required for expression (probably at the level of transcription) of all five known secondary metabolic pathways in the organism. At a higher level still, the bldA gene, whose product seems to be a tRNA essential to translate the rare (in high [G + C] Streptomyces DNA) TTA leucine codon, controls or influences the whole gamut of morphological and 'physiological' differentiation, because bldA mutants fail to produce either secondary metabolites or aerial mycelium and spores, while growing normally in the vegetative phase.(ABSTRACT TRUNCATED AT 250 WORDS)