The xylA and xylB genes of Bacillus subtilis BR151 encoding xylose isomerase and xylulokinase, respectively, were disrupted by gene replacement rendering the constructed mutant strain unable to grow on xylose as the sole carbon source. The Bacillus megaterium encoded xyl genes were cloned by complementation of this strain to xylose utilization. The nucleotide sequence of about 4 kbp of the insertion indicates the presence of the xylA and xylB genes on the complementing plasmid. Furthermore, a regulatory gene, xylR, is located upstream of xylA and has opposite polarity to it. The intergenic region between the divergently oriented reading frames of xylR and xylA contains palindromic sequences of 24 bp spaced by five central bp and 29 bp spaced by 11 bp, respectively, and two promoters with opposite orientation as determined by primer extension analysis. They overlap with one nucleotide of their — 35 consensus boxes. Transcriptional fusions of lacZ to xylA, xylB and xylR were constructed and revealed that xylA and xylB are repressed in the absence and can be 200-fold induced in the presence of xylose. The increased level of xylAB mRNA in induced and its absence in repressed cells confirms that this regulation occurs on the level of transcription. Deletion of the xylR gene encoding the Xyl repressor results in constitutive expression of xylAB. The transcription of xylR is autoregulated and can be induced 9-fold by xylose. The mechanism of this regulation is not clear. While the apparent xyl operator palindrome is upstream of the xylR promoter, the potential recognition of another palindrome downstream of this promoter by Xyl repressor is discussed.