The monomeric multimetal-binding beta-galactosidase of Saccharopolyspora rectivirgula (srbg), a glycosyl hydrolase family-2 enzyme, has a unique sequence consisting of 192 amino acid residues with no similarity to known proteins. This 192-residue sequence (termed the "iota [iota] sequence") appears to be inserted into a sequence homologous to the active-site domain of the Escherichia coli lacZ enzyme (lacZbg). To assess the effects of the iota sequence at specific sites of beta-galactosidase on the catalytic functioning and molecular properties of beta-galactosidase, deletion or insertion mutants of beta-galactosidases were constructed, expressed in LacZ-E. coli strains, and characterized: srbgDelta in which the iota sequence was deleted from srbg, and lacZbgI, in which the 192-residue iota sequence was inserted into the corresponding position (between Asp(591) and Phe(592)) in the active-site domain of lacZbg. srbgDelta was a catalytically inactive, dimeric protein which retained multimetal-binding characteristics, suggesting that the iota sequence is very important for maintaining the structure necessary for the catalytic functioning and the monomeric structure of srbg but is not responsible for the unique metal ion requirements of srbg. On the other hand, lacZbgI existed as a mixture of a monomer, a tetramer, and higher multimers. The monomeric species was inactive, whereas the tetramer and other multimers were catalytically active (V-max/K-m value, 25% of that of lacZbg) and highly specific for beta-D-galactoside. The tetrameric lacZbgI was activated by Mg2+ and Mn2+ with lowered metal affinities, and the stoichiometry of metal binding was unchanged from that of lacZbg. These results, along with the published stereo structure of lacZbg, suggest that, in lacZbgl, the inserted 192-residue iota peptide could fold independently of the lacZbg domains into a "sub-domain," lying distant from the active site and subunit interfaces.