The present invention relates to the .beta.-glucuronidase (GUS) gene fusion system, and to the cloning and characterization of the .beta.-glucuronidase and glucuronide permease genes of Escherichia coli. It is based on the surprising discovery that gene fusions comprising the .beta.-glucuronidase gene may be effectively expressed in a wide variety of organisms to produce active .beta.-glucuronidase enzyme. Because of the abundance and availability of useful substrates for .beta.-glucuronidase enzyme, GUS gene fusions may serve as a superior reporter gene system as well as an effective means of altering cellular phenotype. In conjunction with recombinant glucuronide permease, which may be used to render host cells permeable to .beta.-glucuronidase substrates, the GUS gene fusion system offers almost unlimited applications in the fields of plant and animal genetic engineering.