Bacterial colonies reveal the action of systems for multicellular regulation of genetic activity during growth and development. Colonies produced on agar indicator medium by Escherichia coli strains carrying the transposable genetic fusion element Mudlac displayed organized patterns of differential β-galactosidase expression. One feature of these patterns was the presence of phenotypically distinct concenric rings containing cells that were not genetically distinct. A second feature of the patterns was the appearance of sectorial populations with novel phenotypes, frequently displaying coincident variation in several characters, such as enzyme activity, multicellular aggregation and rate of spread over the agar substrate. Subcloning analysis of sectors with more expansive growth phenotypes revealed that they contained bacteria expressing novel developmental sequences on more than one kind of medium. These novel developmental sequences could be transmitted to progeny bacteria but were reversible during growth in liquid medium. More stable clonal variation in patterns of β-galactosidase expression arose during storage in liquid medium. Most of these changes correlated with transpositions or rearrangments of Mudlac sequences. Some changes in β-galactosidase expression involved interactions between Mudlac elements and unlinked Mu derivatives. These results revealed the operation of novel control systems regulating β-galactosidase expression from the lacZ sequences in a chromosomal Mudlac element and demonstrated at least two different kinds of clonal variation events which affected pattern formation in bacterial colonies. © 1988.