Clinical, bacteriologic, epidemiologic and hospital infection-control observations related to an inter-hospital outbreak of methicillin-resistant Staphylococcus aureus are described. The outbreak involved 66 patients at the University of Oregon Health Sciences Center (UOHSC) and its closely affiliated VA hospital, the Portland VA Medical Center (PVAMC). No environmental source of infection was identified; person-to-person transmission was most likely responsible for its spread. Surveillance cultures demonstrated nasal colonization in house staff and nursing personnel at both hospitals. Inter-hospital transfer of infection was, in all likelihood, achieved via nasal carriage by a single physician. Case-control analysis indicated a significantly increased risk (p less than 0.05) of acquisition of infection related to age, number of days hospitalized, severity of underlying disease and number of invasive procedures. Prior antibiotic receipt was a significant risk factor when analyzed by univariate analysis (p less than 0.01), but, in contrast to previous studies, this was not a significant risk factor (p greater than 0.05) when related variables were controlled by multivariate analysis. Prevention of spread of infection by routine infection control measures was less effective at PVAMC than at UOHSC. Patients at PVAMC were significantly older and had longer durations of hospitalization (p less than 0.05). Antimicrobial therapy of colonized patients and personnel appeared to assist in the control of the outbreak at PVAMC. Antimicrobial therapy with topical bacitracin and oral rifampin, alone or in combination with oral trimethoprim-sulfamethoxazole, was effective in eliminating colonization with methicillin-resistant S. aureus.