BACKGROUND: Commonly encountered nosocomially acquired gram-negative bacteria, especially Klebsiella pneumoniae, produce extended-spectrum beta-lactamases (ESBLs) as an antibiotic resistance mechanism. OBJECTIVE: To determine whether microbiology laboratories should report the presence of ESBLs and to establish the infection-control implications of ESBL-producing organisms. DESIGN: Prospective observational study. SETTING: 12 hospitals in South Africa, Taiwan, Australia, Argentina, the United States, Belgium, and Turkey. PATIENTS: 440 patients with 455 consecutive episodes of K. pneumoniae bacteremia between 1 January 1996 and 31 December 1997; of these, 253 episodes were nosocomially acquired. MEASUREMENTS: The K. pneumoniae isolates were examined for the presence of ESBLs. Pulsed-field gel electrophoresis was used to analyze the molecular epidemiology of nosocomial bacteremia with ESBL-producing K. pneumoniae. RESULTS: Overall, 30.8% (78 of 253) episodes of nosocomial bacteremia and 43.5% (30 of 69) episodes acquired in intensive care units were due to ESBL-producing organisms. After adjustment for potentially confounding variables, previous administration of beta-lactam antibiotics containing an oxyimino group (cefuroxime, cefotaxime, ceftriaxone, ceftazidime, or aztreonam) was associated with bacteremia due to ESBL-producing strains (risk ratio, 3.9 [95% CI, 1.1 to 13.8]). In 7 of 10 hospitals with more than 1 ESBL-producing isolate, multiple strains with the same genotypic pattern were observed, indicating patient-to-patient spread of the organism. CONCLUSIONS: Production of ESBLs by Klebsiella pneumoniae is a widespread nosocomial problem. Appropriate infection control and antibiotic management strategies are needed to stem the spread of this emerging form of resistance.