Most clinical Staphylococcus aureus strains produce either type 5 or type 8 capsular polysaccharides. The production of these capsules is influenced by various environmental factors. To study the regulation of capsule, Tn551 transposon mutagenesis and transcriptional reporter gene fusion were employed to identify several putative regulatory loci that influenced capsule gene expression. One of these, the arl locus, was chosen for further analysis. Tn551 was found to insert within the coding region (near the translational start site of the arlR gene). ArlR, along with ArlS, forms a two-component system that has been previously shown to affect autolysis and production of several secreted proteins. Phenotypic analyses of the arlR-specific mutant and gene fusion analyses showed that arlR activated capsule production at the transcriptional level. However, gel mobility shift assays did not support activation of the capsule genes by direct ArlR binding to the primary cap5 promoter region upstream of the operon. In contrast, it was found that arl activated mgrA, an activator for capsule production, whereas mgrA did not have a significant effect on arlR. Genetic studies supported the notion that arlR functions upstream of mgrA with respect to the regulation of capsule production, although gene fusion studies indicated that arl could also regulate capsule independently from mgrA. Collectively, the results suggest that arl positively regulates capsule production at the transcriptional level primarily through an mgrA-dependent pathway.