A total of 153 nucleotide differences were found over a contiguous 16 kb region between two hyperthermophilic Archaea, Pyrococcus furiosus and Thermococcus litoralis. The 16 kb region in P. furiosus is flanked by insertion sequence (IS) elements with inverted and direct repeats. Both IS elements contain a single open reading frame (ORF) encoding a putative protein of 233 amino acids identified as a transposase. This 16 kb region has the features of a typical bacterial composite transposon and represents a possible mechanism for lateral gene transfer between Archaea or possibly between Archaea and Bacteria. A total of 23 homologous IS elements was found in the genome sequence of P. furiosus, whereas no full-length IS elements were identified in the genomes of Pyrococcus abyssi and Pyrococcus horikoshii. Only one IS element was found in T. litoralis. In P. furiosus and T. litoralis, the 16 kb region contains an ABC transport system for maltose and trehalose that was characterized biochemically for T. litoralis. Regulation of expression studies showed that the malE gene, located on the transposon, and the encoded trehalose/maltose-binding protein (TMBP) are induced in the presence of maltose and trehalose in both P. furiosus and T. litoralis. The implications of transposition as a mechanism for lateral gene transfer among Archaea are discussed.