A model is presented whereby the formation of gene clusters in bacteria is mediated by transfer of DNA within and among taxa. Bacterial operons are typically composed of genes whose products contribute to a single function. If this function is subject to weak selection or to long periods with no selection, the contributing genes may accumulate mutations and be lost by genetic drift. From a cell's perspective, once several genes are lost, the function can be restored only if all missing genes were acquired simultaneously by lateral transfer. The probability of transfer of multiple genes increases when genes are physically proximate. From a gene's perspective horizontal transfer provides a way to escape evolutionary loss by allowing colonization of organisms lacking the encoded functions. Since organism bearing clustered genes are more likely to act as successful donors, clustered genes would spread among bacterial genomes. The physical proximity of genes may be considered a selfish property of the operon since it affects the probability of successful horizontal transfer but may provide no physiological benefit to the host. This process predicts a mosaic structure of modern genomes in which ancestral chromosomal material is interspersed with novel, horizontally transferred operons providing peripheral metabolic functions.