Bacillus circulans NRRL B-3312, a nonpathogenic bacterium that produces the aminoglycoside antibiotic butirosin, is known to contain an aminoglycoside phosphotransferase that is similar to the neomycin phosphotransferases of clinically isolated antibiotic-resistant bacteria. Purified DNAs from B. circulans and the plasmid ColE1-ApR were digested with EcoRI endonuclease and the resulting fragments covalently joined with polynucleotide ligase. The recombined DNA was used to transform E. coli and ampicillin-neomycin resistant colonies were selected. Analysis of several clones indicated that neomycin resistance in the E. coli transformants was due to the presence of the B. circulans phosphotransferase gene. This observation is consistent with the notion that anitbiotic-modifying enzymes from antibiotic-producing organisms may be the sources of antibiotic resistance in plasmid-containing bacteria.