We previously described a bacteriophage of the Lyme disease agent Borrelia burgdorferi designated φBB-1. This phage packages the host complement of the 32-kb circular plasmids (cp32s), a group of homologous molecules found throughout the genus Borrelia. To demonstrate the ability of φBB-1 to package and transduce DNA, a kanamycin resistance cassette was inserted into a cloned fragment of phage DNA, and the resulting construct was transformed into B. burgdorferi CA-11.2A cells. The kan cassette recombined into a resident cp32 and was stably maintained. The cp32 containing the kan cassette was packaged by φBB-1 released from this B. burgdorferi strain, φBB-1 has been used to transduce this antibiotic resistance marker into naive CA-11.2A cells, as well as two other strains of B. burgdorferi. This is the first direct evidence of a mechanism for lateral gene transfer in B. burgdorferi.