TEM-1 beta-lactamase catalyzes the hydrolysis of beta-lactam antibiotics such as the penicillins and cephalosporins, thus providing for bacterial resistance to these compounds. To determine the amino acid residues critical for the structure and function of TEM-1 beta-lactamase, the codons for each of the 263 amino acid residues that constitute the mature form of the enzyme were randomized using a site-directed mutagenesis procedure. Functional random mutants were selected based on their ability to confer ampicillin resistance to Escherichia coli. The DNA sequence of several functional mutants was determined for each set of random mutants. It was found that 43 out of the 263 amino acid residues do not tolerate substitutions and therefore are critical for the structure and activity of the enzyme. In addition, a comparison of conserved residue positions among functional beta-lactamase mutants with conserved residues in the beta-lactamase gene family identified many positions which did not tolerate substitutions in the mutagenesis studies but are freely substituted among members of the gene family. This observation may be due to the accumulation of compensating mutations among members of the gene family. Finally, the sequence variability at residue positions among functional mutants was quantitated by calculating the effective number of substitutions at each position using information-theoretical entropy. These values were used to obtain a quantitative estimate of the correlation between the sequence variability at a position and the fractional accessible surface area of the residue. The correlation is found to be statistically significant in that buried residues tend to exhibit low variability and invariant residues tend to exhibit low solvent exposure. However, the correlation is weak because most residues are neither completely buried nor invariant.