Most strains of Helicobacter pylori from patients with peptic ulcer disease or intestinal‐type gastric cancer carry cagA, a gene that encodes an immunodominant protein of unknown function, whereas many of the strains from asymptomatically infected persons lack this gene. Recent studies showed that the cagA gene lies near the right end of a ≈37 kb DNA segment (a pathogenicity island, or PAI) that is unique to cagA⁺ strains and that the cag PAI was split in half by a transposable element insertion in the reference strain NCTC11638. In complementary experiments reported here, we also found the same cag PAI, and sequenced a 39 kb cosmid clone containing the left ‘cagII’ half of this PAI. Encoded in cagII were four proteins each with homology to four components of multiprotein complexes of Bordetella pertussis (‘Ptl’), Agrobacterium tumefaciens (‘Vir’), and conjugative plasmids (‘Tra’) that help deliver pertussis toxin and T (tumour inducing) and plasmid DNA, respectively, to target eukaryotic or prokaryotic cells, and also homologues of eukaryotic proteins that are involved in cytoskeletal structure. To the left of cagII in this cosmid were genes for homologues of HslU (heat‐shock protein) and Era (essential GTPase); to the right of cagII were homologues of genes for a type I restriction endonuclease and ion transport functions. Deletion of the cag PAI had no effect on synthesis of the vacuolating cytotoxin, but this deletion and several cag insertion mutations blocked induction of synthesis of proinflammatory cytokine IL‐8 in gastric epithelial cells. Comparisons among H. pylori strains indicated that cag PAI gene content and arrangement are rather well conserved. We also identified two genome rearrangements with end‐points in the cag PAI. One, in reference strain NCTC11638, involved IS605, a recently described transposable element (as also found by others). Another rearrangement, in 3 of 10 strains tested (including type strain NCTC11637), separated the normally adjacent cagA and picA genes and did not involve IS605. Our results are discussed in terms of how cag‐encoded proteins might help trigger the damaging inflammatory responses in the gastric epithelium and possible contributions of DNA rearrangements to genome evolution.