Mutants of E. coli K12 with deletions of the beta-galactosidase gene (lacZ) can reacquire the ability to hydrolyze beta-galactosides during prolonged intense selection for growth on lactose. Full lactose competence is restored through a sequence of at least five mutations. Cell extracts of these derived strains hydrolyze o-nitrophenyl-beta-D-galactoside, the standard substrate for assay of beta-galactosidase. The enzyme responsible for this activity differs in its immunological, kinetic, and sedimentation characteristics from the lacZ beta-galactosidase of wild-type E. coli. Its genetic determinant, designated ebg-5, maps at 59 min on the E. coli chromosome, whereas the lac operon maps at 10 min. We suggest that a gene not involved in lactose utilization has been progressively changed into a form capable of specifying a beta-galactosidase and that this process is similar to that whereby genes with new functions are evolved by natural selection.