Plasmid formation by N- derivatives of lambdoid phages has been reinvestigated with transducing phages carrying the trp, lac and gal genes of Escherichia coli. Transduction by lambda N- cI- derivatives was inefficient and short-lived in each case, under both selective and nonselective conditions. Mutant-operators were introduced to relieve possible auto-repression by the cro gene product. Such N-defective phage genomes were able to propagate continually as plasmids, although without selection they were gradually lost from the carrier cells. Plasmid formation remained inefficient, however. The entire chromosome of N- phages can be expressed by transcription that leaks through the serially arranged Rho-dependent terminators. Some functions so expressed are deleterious to the plasmid state and cause the instability of lambda N- plasmids.