Genetic transduction is a major evolutionary force that underlies bacterial adaptation.Here we report that the temperate bacteriophages ofStaphylococcusaureusengage in adistinct form of transduction we term lateral transduction. Staphylococcal prophagesdo not follow the previously described excision-replication-packaging pathway but insteadexcise late in their lytic program. Here, DNA packaging initiates in situ from integratedprophages, and large metameric spans including several hundred kilobases of theS.aureusgenome are packaged in phage heads at very high frequency. In situ replication beforeDNA packaging creates multiple prophage genomes so that lateral-transducing particles formduring normal phage maturation, transforming parts of theS.aureuschromosome intohypermobile regions of gene transfer.