Members of two genera of Gram-negative bacteria, Serratia and Erwinia, produce a beta-lactam antibiotic, 1-carbapen-2-em-3-carboxylic acid. We have reported previously the cloning and sequencing of the genes responsible for production of this carbapenem in Erwinia carotovora. These genes are organized as an operon, carA--H, and are controlled by a LuxR-type transcriptional activator, encoded by the linked carR gene. We report in this paper the genetic dissection of this putative operon to determine the function of each of the genes. We demonstrate by mutational analysis that the products of the first five genes of the operon are involved in the synthesis of the carbapenem molecule. Three of these, carABC, are absolutely required. In addition, we provide evidence for the existence of a novel carbapenem resistance mechanism, encoded by the CarF and carG genes. Both products of these overlapping and potentially translationally coupled genes have functional, N-terminal signal peptides. Removal of these genes from the Erwinia chromosome results in a carbapenem-sensitive phenotype. We assume that these novel beta-lactam resistance genes have evolved in concert with the biosynthetic genes to ensure 'self-resistance' in the Erwinia carbapenem producer.