From July 1983 through June 1990, 319 patients with methicillin-resistant Staphylococcus aureus (MRSA) were identified at the University of California, Davis Medical Center. Initially, our goal was eradication of MRSA from the hospital flora. Our approach was: (a) immediate notification of all MRSA isolates by the microbiology laboratory; (b) strict isolation; (c) cohorting; (d) bathing patients with an iodophor; (e) surveillance cultures of patients and staff; (f) treatment of all colonized persons; and (g) strict isolation on readmission. Control of spread was achieved but eradication was not. In 1987 our strategy was modified in order to establish the least restrictive methods to maintain control of the spread of MRSA. After notification by the microbiology laboratory, we now require: (a) contact isolation; (b) surveillance cultures of patients associated with each new case; and (c) contact isolation for all MRSA patients on readmission. Strict isolation and employee culturing are used only during major outbreaks. We have averaged four new cases of MRSA per month over the 7-year period, including four major outbreaks. Since 1987, we have averaged only three new cases per month with one major MRSA outbreak. Annual cost savings of greater than $50,000 have been realized through the policy modifications. We conclude that the use of contact isolation with some modifications has saved time and money and has successfully controlled the spread of MRSA in our university hospital.