The lactose structural genes, without the lactose promoter, have been incorporated into the bacteriophage Mu genome to form a Mu-lac specialized transducing phage. This phage also carries a gene encoding resistance to ampicillin (Ap)[Mu(Ap, lac)]. After infection and upon establishment of lysogeny, the Mu(Ap, lac) genome can integrate into apparently random sites in the Escherichia coli chromosome. When integration occurs within a gene in the orientation of its transcription, the lactose structural genes are so situated that they become expressed solely from the promoter of that gene. Thus, expression of the lactose genes of Mu(Ap, lac) can be used as an assay for transcription of that gene and for functional and mutational studies of gene regulation.