Genetic studies indicate that the E. coli C chromosomal genes which are responsible for catabolism of the pentitol sugars, ribitol and D-arabitol, are not present in the closely related E. coli K12 strains (Reiner 1975). Molecular studies of these tightly linked genes reveal that they are surrounded by 1.4 kilobase inverted repeats of imperfect homology (Link and Reiner 1982). Here we report that E. coli C lacks genes for catabolism of the hexitol sugar galactitol, genes which are present in E. coli K12. Furthermore, the ribitol-arabitol and galactitol genes, which show no mutual homology, are mutually exclusive when exchanged (by homologous recombination) between E. coli C and K12. Physical characterization of λ specialized transducing phages carrying the ribitol-arabitol or galactitol genes demonstrates that this exclusion results because these genes have identical locations in their respective chromosomes. This novel type of allelic relationship between nonhomologous genes has not been previously described in prokaryotes. Analysis of the catabolic capabilities of a collection of natural E. coli strains suggests that this exclusion relationship extends to strains in the natural E. coli population. We suggest an insertion/deletion model to account for the origins of this unusual gene arrangement.