The chromosome of the murine pathogen Mycoplasma pulmonis undergoes rearrangements at a high frequency. We show that some of these rearrangements regulate the phase-variable expression of a cluster of genes (the vsa locus) that encode the variable V-1 surface antigens. Only one vsa gene is associated with an expression site; the other vsa genes are transcriptionally silent. The silent genes lack the 5' end region (promoter and ribosome-binding site) that is present in the expressed gene, and DNA rearrangements regulate gene expression by reassorting the 5' end region from an expressed gene with the 3' end region from a previously silent gene. All vsa rearrangements identified so far are site-specific DNA inversions that occur between copies of a specific 34 bp sequence that is conserved in each vsa gene. Interestingly, DNA inversions within the vsa locus apparently occur in concert with inversion of the hsd1 element, which regulates restriction and modification activity in M. pulmonis.