Escherichia coli K1 is the leading cause of human neonatal sepsis and meningitis and is important in other clinical syndromes of both humans and domestic animals; in this strain the polysialic acid capsule (K1 antigen) functions by inhibiting innate immunity. Recent discovery of the phase-variable capsular O acetylation mechanism indicated that the O-acetyltransferase gene, neuO, is carried on a putative K1-specific prophage designated CUS-3 (E. L. Deszo, S. M. Steenbergen, D. I. Freedberg, and E. R. Vimr, Proc. Natl. Acad. Sci. USA 102:5564-5569, 2005). Here we describe the isolation and characterization of a CUS-3 derivative (CUS-3a), demonstrating its morphology, lysogenization of a sensitive host, and the distribution of CUS-3 among a collection of 111 different K1 strains. The 40,207-bp CUS-3 genome was annotated from the strain RS218 genomic DNA sequence, indicating that most of the 63 phage open reading frames have their closest homologues in one of seven different lambdoid phages. Translational fusion of a reporter lacZ fragment to the hypervariable poly-Psi domain facilitated measurement of phase variation frequencies, indicating no significant differences between switch rates or effects on rates of the methyl-directed mismatch repair system. PCR analysis of poly-Psi domain length indicated preferential loss or gain of single 5'-AAGACTC-3' nucleotide repeats. Analysis of a K1 strain previously reported as "locked on" indicated a poly-Psi region with the least number of heptad repeats compatible with in-frame neuO expression. The combined results establish CUS-3 as an active mobile contingency locus in E. coli K1, indicating its capacity to mediate population-wide capsule variation.