Scalded skin syndrome (SSS) has been associated with group II staphylococci. We recently studied a nursery outbreak of this syndrome caused by group I S. aureus. The epidemic occurred from 8/1-14/73 in the newborn nursery of a Salt Lake City hospital. Four female infants developed a scarlatinaform eruption within the first week of life. The eruption was characterized by a generalized, finely papular erythema; one infant experienced mild epidermal peeling. Two of the infants were febrile. Cultures of the umbilical cords and/or the anterior nares grew S. aureus, phage type 29/52/79/86/D11/81. The eruption rapidly cleared after treatment with Nafcillin. Bacteriologic surveillance of the nursery revealed one admitting nurse as a nasal carrier of the epidemic phage type; no infants other than the original cases were colonized with the epidemic strain, and no additional cases were uncovered by a telephone survey. Staphylococci which cause SSS are characterized by the production of a toxin which is capable of producing exfoliation in newborn mice. The epidemic strain, when tested in the suckling-mouse, produced epidermal necrolysis. The demonstration that a group I staphylococcus can produce an exfoliative toxin suggests that a common mechanism for toxin production may exist for groups I and II staphylococci.