The hemolytic phenotype in Escherichia coli is determined by four genes. Two (hlyC and hlyA) determine the synthesis of a hemolytically active protein which is transported across the cytoplasmic membrane. The other two genes (hlyBa and hlyBb) encode two proteins which are located in the outer membrane and seem to form a specific transport system for hemolysin across the outer membrane. The primary product of gene hlyA is a protein (protein A) of 106,000 daltons which is nonhemolytic and which is not transported. No signal peptide can be recognized at its N-terminus. In the presence of the hlyC gene product (protein C), the 106,000-dalton protein is processed to the major proteolytic product of 58,000 daltons, which is hemolytically active and is transported across the cytoplasmic membrane. Several other proteolytic fragments of the 106,000-dalton protein are also generated. During the transport of the 58,000-dalton fragment (and possible other proteolytic fragments of hlyA gene product), the C protein remains in the cytoplasm. In the absence of hlyBa and hlyBb the entire hemolytic activity (mainly associated with the 58,000-dalton protein) is located in the periplasm: Studies on the location of hemolysin in hlyBa and hlyBb mutants suggest that the gene product of hlyBa (protein Ba) binds hemolysin and leads it through the outer membrane whereas the gene product of hlyBb (protein Bb) releases hemolysin from the outer membrane. This transport system is specific for E coli hemolysin. Other periplasmic enzymes of E coli and heterologous hemolysin (cereolysin) are not transported.