In E. coli, two proteins are necessary for the metabolism of lactose. These proteins are the enzyme β-galactosidase, which cleaves lactose to yield galactose and glucose, and a carrier molecule, lactose permease, which is required for the entry of lactose (and other galactosides) into the cell. The existence of two proteins was first shown by a combination of genetic experiments and biochemical analysis.
    First, hundreds of Lac-mutants (unable to use lactose as a carbon source) were isolated. By genetic manipulation, some of these mutations were moved from the E. coli chromosome to an F'lac plasmid (a plasmid carrying the genes for lactose utilization) and then partial diploids having the genotypes F'lac^-/ lac⁺ or F'lac⁺/lac^- were constructed. (The relevant genotype of the plasmid is given to the left of the diagonal line and that of the chromosome to the right.) It was observed that these diploids always produced a Lac+ phenotype, which showed that none of the lac^- mutants make an inhibitor that prevents functioning of the lac gene.
    Partial diploids were also constructed in which both the chromosome and the F'lac plasmid were lac^-. Using different pairs of lac^- mutants. It was found that some pairs were phenotypically Lac⁺ and some were Lac^-. This complementation test showed that all of the mutants initially isolated fell into one of two groups, which were called lacZ and lacY. Mutants in the two groups z and y have the property that the partial diploids F'lacY^- lacZ⁺/lacy⁺ lacz^- and F'lacY⁺lacZ^-/ lacY^- lacZ⁺ have a Lac⁺ phenotype and the genotypes F'lacY^- lacZ⁺/lacy⁺ lacz^- and F'lacY⁺ lacZ^-/lacy⁺ lacz^- have the Lac^- phenotype. The existence of two complementation groups was good evidence that there are at least two genes in the lac system.
    The lacZ gene is the structural gene for β-galactosidase. This enzyme is readily detected by a simple colorimetric assay that takes advantage of the fact that β-galactosidase catalyzes the hydrolysis of o-nitrophenyl-β-galactoside, a lactose analog. The product o-nitrophenoxide, which is yellow, can be detected by light absorption at a wavelength of 420 nm. The function of the lacY gene product as lactose permease was strongly suggested by experiments that showed that lacZ⁺ lacY^- cells cannot transport [¹⁴C] lactose into the cell but lacZ^- lacY⁺ cells can do so.
    Investigators discovered a third gene, lacA, while studying lac- tose transport. The lacA gene product is a β-galactoside transacetylase, which transfers an acetyl group from acetyl-CoA to lactose analogs. The reason that lacA was not detected at the same time as lacZ and lacY is that its gene product, transacetylase, is not required for lactose catabolism. The precise role of lacA is still a matter of conjecture. One hypothesis is that transacetylase detoxifies lactose analogs that would harm cells.