Toxigenic strains of Pasteurella multocida produce a 146 kDa toxin (PMT) that acts as a potent mitogen. Sequence analysis of the structural gene for PMT, toxA, previously suggested it was horizontally acquired, because it had a low G + C content relative to the P. multocida genome. To address this, the sequence of DNA flanking toxA was determined. The sequence analysis showed the presence of homologues to bacteriophage tail protein genes and a bacteriophage antirepressor, suggesting that the toxin gene resides within a prophage. In addition to phage genes, the toxA flanking DNA contained a homologue of a restriction/modification system that was shown to be functional. The presence of a bacteriophage was demonstrated in spent medium from toxigenic P. multocida isolates. Its production was increased by mitomycin C addition, a treatment that is known to induce the lytic cycle of many temperate bacteriophages. The genomes of bacteriophages from three different toxigenic P. multocida strains had similar but not identical restriction profiles, and were approximately 45-50 kb in length. The prophages from two of these had integrated at the same site in the chromosome, in a tRNA gene. Southern blot analysis confirmed that these bacteriophages contained the toxA gene.