Infection with strains of methicillin-resistant Staphylococcus aureus occurred in 40 patients at time of admission to a large urban hospital from March to December 1980. Community-acquired methicillin-resistant S. aureus infections occurred in 24 drug abusers and 16 nonabusers. Patients with infections had a longer mean hospitalization and previously had received antimicrobial therapy more frequently than control subjects. Drug abusers with infections had been treated with cephalosporins more often than control subjects (P less than 0.05). Phage typing of 32 isolates showed that 21 were linked by a common phage type (29/52/80/95). Transmission of methicillin-resistant S. aureus from community-acquired cases occurred in the hospital. By January 1981, methicillin-resistant S. aureus accounted for 30.6% of nosocomial S. aureus infections at Henry Ford Hospital. Methicillin-resistant S. aureus infection may arise in the community as well as in the hospital and has the potential to disseminate in both settings.