Insertion of the erythromycin-resistance transposon Tn551 into the Staphylococcus aureus chromosome at a site which maps between the purB and ilv loci has a pleiotrophic effect on the production of a number of extracellular proteins. Production of alpha, beta and delta hemolysin, toxic shock syndrome toxin (TSST-1) and staphylokinase was depressed about fifty-fold while protein A production was elevated twenty-fold. Hybridization analysis showed that the defect in expression of TSST-1 and alpha hemolysin was at the transcriptional level. Inability of the mutant strain to express either a cloned TSST-1 gene or the chromosomal gene indicates that the transposon has inactivated a trans-active positive control element. This element has been designated agr for accessory gene regulator.