A new approach for studying functional rRNA fragments has been developed based on using a plasmid library expressing random fragments of rRNA. A 34 nucleotide long fragment of Escherichia coli 23S rRNA has been identified that renders cells resistant to erythromycin, when expressed in vivo. The rRNA fragment contains a five codon long open reading frame, initiating at GUG and terminating at UAA, with a Shine-Dalgarno sequence located at an appropriate distance from the initiator codon. Translation of this mini-gene is required for the observed erythromycin resistance. Experiments with in vitro translated, or synthetic, peptide indicate the ribosome as a likely target for the action of the identified rRNA-encoded peptide, which apparently remains associated with the ribosome after completion of its translation. The known properties of the rRNA-encoded peptide are compared with information about other functionally active short peptides that can be involved in regulation of translation.