The nucleotide sequence of a 7.3-kilobase-pair fragment of DNA encoding a hemolytic activity from Serratia marcescens was determined. Two large open reading frames were identified, designated shlA (Serratia hemolysin) and shlB, capable of encoding polypeptides of 165, 056 and 61,897 molecular weight, respectively. Both reading frames were expressed in vivo. The shlB gene product was localized to the outer membrane of Escherichia coli cells harboring the S. marcescens hemolysin determinant. Consistent with this location, a signallike sequence was identified at the N terminus of the polypeptide predicted from the nucleotide sequence of the shlB gene. Hyperexpression of the shlB locus permitted the identification of two shlB-encoded polypeptides of 65,000 and 62,000 molecular weight, respectively. Determination of the N-terminal amino acid sequence of the purified 62,000-molecular-weight protein confirmed that it was the mature form of the ShlB protein initially synthesized as a precursor (65,000-molecular-weight protein). By using polyclonal antisera raised against the purified proteins, ShlA and ShlB were identified in the outer membrane of S. marcescens. The shlA gene product was shown to interact with erythrocyte membranes, confirming it as the hemolysin proper. Both hemolysis and the interaction of ShlA with erythrocyte membranes did, however, require the ShlB function. Progressive deletion of the C terminus of the ShlA protein gradually reduced hemolytic activity until 37% of the amino acids had been removed. Elimination of 54% of the amino acids produced a nonhemolytic protein which, however, was still capable of associating with erythrocyte membranes.