The genomic location of the gene(s) which provides vaccinia virus (VV) alpha-amanitin-resistant mutants with a drug-resistant phenotype have been mapped to the HindIII N/M region of the genome by the use of marker rescue techniques [E. C. Villarreal and D. E. Hruby (1986) J. Virol. 57, 65-70]. Nucleotide sequencing of a 2356-bp HindIII-Sau3A fragment of the vaccinia virus genome encompassing this region reveals the presence of two complete leftward-reading open reading frames (ORFs, N2 and M1) and two incomplete ORFs (N1 and M2). By computer analysis the N2 and M1 ORFs would be predicted to encode soluble VV polypeptides with molecular weights of approximately 20 and 48 kDa, respectively. The N2 and M1 ORFs have extremely A-T-rich 5'-proximal sequences, consistent with previous data regarding the location and A-T-richness of viral early promoters. Likewise, the consensus signal believed to be involved in terminating VV early gene transcription, TTTTTNT, was evident at the 3'-boundary of both the N2 and M1 ORFs suggesting that these genes may be VV early genes. The in vivo transcriptional activity, orientation, and limits of these putative transcriptional units were investigated by Northern blot, nuclease S1, and primer extension analysis. Both N2- and M1-specific transcripts were detected in the cytoplasm of VV-infected cells, suggesting that these loci are bonafide viral genes. Time-course nuclease S1 experiments revealed that the N2 gene was transcribed exclusively prior to VV DNA replication. In contrast, the M1 gene was transcribed throughout infection, although different start sites were used at early versus late times postinfection. These results are discussed in relation to the drug-resistant phenotype and future experiments to identify the viral gene product responsible.