A gene bank of Sau3A1-generated Streptococcus pneumoniae DNA fragments was constructed in Escherichia coli K-12 by cloning into the BamHI site of the cosmid vector pHC79. Clones expressing the pneumolysin determinant were selected by testing for hemolytic activity which could be inhibited by antibody to purified pneumolysin and by cholesterol. Restriction analysis of pneumolysin-positive recombinant cosmid DNA indicated that the coding sequence for the toxin was located within a 2.9-kilobase-pair (kbp) ClaI DNA fragment. This fragment, which included 0.35 kbp of vector pHC79 DNA, was subcloned into the plasmid pBR322. E. coli cells harboring this recombinant plasmid (designated pJCP20) produced approximately one-third of the amount of pneumolysin found in the donor S. pneumoniae strain. Plasmid pJCP20 was stably maintained in E. coli and resulted in the accumulation of active pneumolysin in the cytoplasm. Western blot analysis showed that E. coli harboring pJCP20 produced two forms of the toxin with molecular weights of 54,000 and 52,000. The lower-molecular-weight form was indistinguishable from native pneumolysin. Subcloning the 2.9-kbp DNA fragment into the expression vector pEV31 allowed the determination of the direction of transcription of the pneumolysin gene. The pneumolysin-coding sequence (approximately 1.5 kbp) has been localized to within a 1.75-kbp segment of pneumococcal DNA.