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We recently described a Tn551 insertion in the chromosome of Staphylococcus aureus S6C that resulted in drastically reduced expression of extracellular lipase (M. S. Smeltzer, S. R. Gill, and J. J. Iandolo, J. Bacteriol. 174:4000-4006, 1992). The insertion was localized to a chromosomal site (designated omega 1058) distinct from the lipase structural gene (geh) and the accessory gene regulator (agr), both of which were structurally intact in the lipase-negative (Lip-) mutants. In this report, we describe a phenotypic comparison between strains S6C, a hyperproducer of enterotoxin B; KSI9051, a derivative of S6C carrying the Tn551 insertion at omega 1058; ISP546, an 8325-4 strain that carries a Tn551 insertion in the agr locus; and ISP479C, the parent strain of ISP546 cured of the Tn551 delivery plasmid pI258repA36. Compared with their respective parent strains, ISP546 and KSI9051 produced greatly reduced amounts of lipase, alpha-toxin, delta-toxin, protease, and nuclease. KSI9051 also produced reduced amounts of staphylococcal enterotoxin B. Coagulase production was increased in ISP546 but not in KSI9051. Using a mouse model, we also demonstrated that ISP546 and KSI9051 were far less virulent than ISP479C and S6C. We have designated the genetic element defined by the Tn551 insertion at omega 1058 xpr to denote its role as a regulator of extracellular protein synthesis. We conclude that xpr and agr are similar and possibly interactive regulatory genes that play an important role in pathogenesis of staphylococcal disease.