Insertion of the erythromycin resistance transposon Tn551 into a single site of the Staphylococcus aureus chromosome resulted in decreased production of alpha-toxin, serine and metallo-proteinases and several other extracellular proteins and a simultaneous increase in the production of protein A. The site of insertion, designated exp, was separate from the structural gene for alpha-toxin and protein A. Hybridization analysis showed that the effect of the insertional mutation on the expression of the alpha-toxin and protein A was at the level of transcription. The chromosomal DNA flanking the transposon and the corresponding DNA of the wild-type strain was cloned in Escherichia coli. Northern blot hybridization experiments revealed that the exp locus codes for a major RNA of approximately 3.5 kb. This RNA was not found in the insertional mutant nor in a spontaneous exp mutant. A map of the exp locus constructed by Northern blot and restriction enzyme analysis showed that the insertional mutation was located in the middle of the coding sequence of the 3.5 kb RNA. The insertional mutant was reverted to wild type by inserting a recombinant plasmid containing most of the coding sequence of the 3.5 kb RNA.