We have reconstituted biologically relevant transcriptional antitermination in vitro by the phage lambda N protein. This required the isolation of NusG, a newly identified Escherichia coli transcription elongation factor. NusG is encoded by an E. coli gene, formerly called U and now called nusG, in which a mutation affects antitermination by N in vivo. Efficient antitermination by N in our reconstituted system depends on the bacterial proteins NusG, NusA, NusB, and ribosomal protein S10 (which functions without ribosomes in transcriptional antitermination). In reactions containing E. coli S100 extract, NusG is stoichiometrically bound to lambda N-modified transcription elongation complexes. We used RNA polymerase affinity chromatography to show that NusG binds to the core component of E. coli RNA polymerase. This binding is weak, and the stable association of NusG with lambda elongation complexes additionally requires at least N, NusA, and the boxA component of an N utilization site. In reactions containing bacterial S100 extract, NusG and NusB are also present in elongation complexes transcribing E. coli boxA-containing rDNA.