Proteins can be remarkably tolerant of major mutational changes. Sites that accomodate large insertions without loss of function ("permissive" sites) appear generally to correspond to surface regions at which the added sequences do not disrupt overall folding. The identification of such sites can aid in the engineering of functional derivatives of a protein with novel properties. To screen for permissive sites, we developed a simple two-step procedure for generating 31-codon insertions in cloned genes. In a first step, a beta-galactosidase or alkaline phosphatase gene fusion is generated by insertion of a transposon derivative into the target gene. Requiring beta-galactosidase or alkaline phosphatase activity fixes the translational reading frame of the transposon relative to the target gene. In a second step, most of the transposon sequences are excised in vitro, leaving the in-frame insertion. Insertions may be targeted either to cytoplasmic or exported protein sequences, and the inserted sequence acts as an epitope in a variety of proteins. As a test case, a set of 31-codon insertions in the Escherichia coli lac permease gene was generated. The lactose transport activities of the mutant proteins followed a simple pattern: most of the proteins (10/12) with insertions in sequences thought to face the cytoplasm or periplasm were at least partially active, whereas all proteins (9/9) with insertions in membrane-spanning sequences were inactive. The only exceptions were two inactive proteins with insertions in the third cytoplasmic region. Most of the inactive proteins were detected at reduced levels in cells, presumably due to proteolytic breakdown. These studies thus illustrate the use of the new method to identify permissive sites and help document the remarkable sequence flexibility of many of the hydrophilic loops in lac permease. In addition to screening for permissive sites, 31-codon insertion mutagenesis may be useful in epitope-tagging proteins at multiple internal positions, in analyzing membrane protein topology, and in dissecting structure-function relationships in proteins.