In natural transformation of bacteria, free naked fragments of double-stranded DNA become attached to the surface of the recipient cell. Such free DNA molecules become available in the environment by natural decay and lysis of bacteria.

After attachment to the bacterial surface, the double-stranded DNA fragment is nicked and one strand is digested by bacterial nuclease resulting in a single-stranded DNA which is then taken in by the recipient by an energy-requiring transport system.
The ability to take up DNA is developed in bacteria when they are in the late logarithmic phase of growth. This ability is called competence. The single-stranded incoming DNA can then be exchanged with a homologous segment of the chromosome of a recipient cell and integrated as a part of the chromosomal DNA resulting in recombination. If the incoming DNA fails to recombine with the chromosomal DNA, it is digested by the cellular DNase and it is lost.
In the process of recombination, Rec A type of protein plays an important role. These proteins bind to the single-stranded DNA as it enters the recipient cell forming a coating around the DNA strand. The coated DNA strand then loosely binds to the chromosomal DNA which is double-stranded. The coated DNA strand and the chromosomal DNA then move relative to each other until homologous sequences are arrived at.
Next, RecA type proteins actively displace one strand of the chromosomal DNA causing a nick. The displacement of one strand of the chromosomal DNA requires hydrolysis of ATP i.e. it is an energy-requiring process.
The incoming DNA strand is integrated by base-pairing with the single-strand of the chromosomal DNA and ligation with DNA-ligase. The displaced strand of the double-helix is nicked and digested by cellular DNase activity. If there is any mismatch between the two strands of DNA, these are corrected. Thereby, transformation is completed.
The sequence of events in natural transformation is shown schematically in Fig. 9.97:
Schematic Representation of the Steps in Integration
Natural transformation has been reported in several bacterial species, like Streptococcus pneumoniae. Bacillus subtilis, Haemophilus influenzae, Neisseria gonorrhoae etc., though the phenomenon is not common among the bacteria associated with humans and animals. Recent observations indicate that natural transformation among the soil and water-inhabiting bacteria may not be so infrequent. This suggests that transformation may be a significant mode of horizontal gene transfer in nature.

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