This paper describes an investigation of the complex internal regulatory circuitry of the staphylococcal sae locus and the impact of modifying this circuitry on the expression of external genes in the sae regulon. The sae locus contains four genes, the saeR and S two-component signalling module (TCS), and saeP and Q, two upstream genes of hitherto unknown function. It is expressed from two promoters, P(A)sae, which transcribes only the TCS, and P(C)sae, which transcribes the entire locus. A bursa aurealis (bursa) transposon insertion in saeP in a derivative of Staphylococcus aureus NCTC 8325 has a profound effect on sae function. It modifies the activity of the TCS, changing the expression of many genes in the sae regulon, even though transcription of the TCS (from P(A)sae) is not interrupted. Moreover, these effects are not due to disruption of saeP since an in-frame deletion in saeP has essentially no phenotype. The phenotype of S. aureus strain Newman is remarkably similar to that of the saeP : : bursa and this similarity is explained by an amino acid substitution in the Newman saeS gene that is predicted to modify profoundly the signalling function of the protein. This concurrence suggests that the saeP : : bursa insertion affects the signalling function of saeS, a suggestion that is supported by the ability of an saeQR clone, but not an saeR clone, to complement the effects of the saeP : : bursa insertion.