A methicillin- and rifampin-resistant strain of Staphylococcus aureus was introduced into a university hospital by interstate transfer of an infected surgical patient. An outbreak occurred, and 17 patients became infected or colonized with the epidemic strain. Reservoirs appeared to be patients who were infected or colonized with the resistant S aureus and possibly two nurses who were nasal carriers. The outbreak isolate was likely spread by contact with contaminated hands of personnel. A retrospective case-control study identified tracheostomy, débridement, and irrigation of wounds by power spray and prolonged nasogastric intubation as risk factors for acquisition of the epidemic strain. Analysis of factors by groups indicated that surgical procedures, wound care procedures and instrumentation of the respiratory tract were significantly associated with cases. The nasal carrier state was eradicated in two nurses by topical application of 5% vancomycin. The epidemic strain was eradicated from the hospital 8 months after it was introduced.