The Borrelia genome is comprised of linear and circular elements, including a group of 32-kb circular plasmids (cp32s). Earlier analyses identified a bacteriophage, varphiBB-1, that may package cp32s, suggesting that these plasmids are prophages. cp32-8, cp32-9, and cp32-1 (plasmids L, N, and P, respectively) encode virulence factors such as the factor H binding, OspE proteins (BBL39, BBN38, and BBP38). Here the expression patterns of cp32-8 open reading frames (ORFs) in in vitro-cultivated 1-methyl-3-nitroso-nitroguanidine (MNNG)-treated and untreated spirochetes and during infection were assessed. ORFs BBL42 through BBL28, which encode several bacteriophage protein homologs, were found to be cotranscribed and expression was upregulated by MNNG. Immunoblotting revealed that MNNG-induced transcription led to increased protein production. The expression of several genes that reside outside of the BBL42-BBL28 operon was not affected by MNNG. Some of these genes, including OspE (BBL39), appear to represent morons. Real-time reverse transcription-PCR of spirochetes in mouse tissue revealed that although the phage operon was not induced during infection, transcription of BBL23 (previously designated BlyA), a putative holin, was upregulated. This observation indicates that some genes within the operon can be independently transcribed from internal promoters. Additional transcriptional analyses of the operon identified multiple transcriptional start sites and provided evidence for the expression of a homologous operon from other cp32s. The data support the hypothesis put forth by C. Eggers and D. S. Samuels (J. Bacteriol. 181:7308-7313, 1999) that the cp32s are prophages, a finding with broad implications for our understanding of Borrelia pathogenesis and Borrelia genome evolution.