On the basis of mutational analysis, the genes for phosphonate uptake and degradation in Escherichia coli were shown to be organized in a 10.9-kb operon of 14 genes (named phnC to phnP) and induced by phosphate (Pi) starvation [Metcalf and Wanner (1993) J Bacteriol 175. 3430-3442]. The repression of phosphonate utilization by Pi has hindered both the biochemical characterization of the carbon-phosphorus (C-P) lyase activity and the development of improved methods for phosphonate biodegradation in biotechnology. We have cloned the genes phnG to phnP (associated with C-P lyase activity) with the lac promoter to provide expression of C-P lyase in the presence of Pi. A number of strains lacking portions of the phn operon have been constructed. In vivo complementation of the strains, in which phnC to phnP (including both Pn transport and catalysis genes) or phnH to phnP (including only catalysis genes) was deleted, with plasmids carrying various fragments of the phn operon revealed that the expression of phnC-phnP gene products is essential to restore growth on minimal medium with phosphonate as the sole phosphorus source, while phnG-phnM gene products are required for C-P lyase activity as assessed by in vivo methane production from methylphosphonic acid. The minimum size of the DNA required for the whole-cell C-P lyase activity has been determined to be a 5.8-kb fragment, encompassing the phnG to phnM genes. Therefore, there is no requirement for the phn CDE-encoded phosphonate transport system, suggesting that cleavage of the C-P bond may occur on the outer surface of the inner membrane of E. coli cells, releasing the carbon moiety into the periplasm. These data are in agreement with the observation that phosphonates cannot serve as the carbon source for E. coli growth.