Xenorhabdus nematophilus is an insect pathogen that lives in a symbiotic association with a specific entomopathogenic nematode. During prolonged culturing, variant cells arise that are deficient in numerous properties. To understand the genetic mechanism underlying variant cell formation, a transposon mutagenesis approach was taken. Three phenotypically similar variant strains of X. nematophilus, each of which contained a single transposon insertion, were isolated. The insertions occurred at different locations in the chromosome. The variant strain, ANV2, was further characterized. It was deficient in several properties, including the ability to produce antibiotics and the stationary-phase-induced outer membrane protein, OpnB. Unlike wild-type cells, ANV2 produced lecithinase. The emergence of ANV2 from the nematode host was delayed relative to the emergence of the parental strain. The transposon in ANV2 had inserted in a gene designated var1, which encodes a novel protein composed of 121 amino acid residues. Complementation analysis confirmed that the pleiotropic phenotype of the ANV2 strain was produced by inactivation of var1. Other variant strains were not complemented by var1. These results indicate that inactivation of a single gene was sufficient to promote variant cell formation in X. nematophilus and that disruption of genetic loci other than var1 can result in the same pleiotropic phenotype.