Subclinical mastitis caused by streptococcal infections affected 27 of 83 cows in a commercial dairy herd. Between three and six weeks after intramammary treatment of these cows with cloxacillin, 16 (59 per cent) of the treated cows developed acute clinical mastitis associated with Mycobacterium smegmatis. None of the untreated cows was affected. Infected quarters were moderately hypertrophied and fine clots were present in the milk for three to four weeks. No cows showed systemic signs of illness. Studies carried out over 12 months showed that infected cows shed M smegmatis for three to four months and affected quarters remained hypertrophied in all but one cow after 12 months. The mean milk cell count of affected quarters fell slowly from 4,850,000/ml in the acute stage to 810,000/ml five months later and 620,000/ml 12 months later, suggesting that the organism persisted in the udder. The estimated mean loss in lactation yield for cows with M smegmatis mastitis was 10.8 per cent. Losses were greatest when the hind quarters were involved (mean 28 per cent for cows with both hind quarters affected). Ten of the 16 affected cows were ultimately culled owing to serious reductions in yield.