A procedure has been developed for obtaining Hemophilus influenzae of such competence that 1 to 10 per cent transform to any of several genetic factors by utilizing a period of aerobic growth followed by a non-aerobic period. Differences in levels of competence were not due to differences in genetic background. Competence was due to at least one factor intrinsic to the cell or site on the cell and was not transferable to non-competent cells. Competence was affected by salt concentration, pH, and temperature. Washing competent cells reduces their ability to transform, but not their capacity to bind DNA reversibly. The irreversible step could be restored with little or no accompanying growth. These facts suggest that reversible and irreversible binding represent separate biochemical steps. DNA initiates a reaction in cells leading to a loss of competence. In the absence of DNA the cells remain competent for at least an hour. Competence correlates quantitatively with predictability of multiple transformations. The observed and calculated values of multiple transformations are in closer agreement, the higher the frequency of transformation for single markers. The correction needed to bring the two figures into agreement is a measure of the fraction of non-competent cells.