A mechanism of capsular polysaccharide phase variation in Neisseria meningitidis is described. Meningococcal cells of an encapsulated serogroup B strain were used in invasion assays. Only unencapsulated variants were found to enter epithelial cells. Analysis of one group of capsule‐deficient variants indicated that the capsular polysaccharide was re‐expressed at a frequency of 10⁻³. Measurement of enzymatic activities involved in the biosynthesis of the α‐2,8 polysialic acid capsule showed that polysialyltransferase (PST) activity was absent in these capsule‐negative variants. Nucleotide sequence analysis of siaD revealed an insertion or a deletion of one cytidine residue within a run of (dC)₇ residues at position 89, resulting in a frameshift and premature termination of translation. We analysed unencapsulated isolates from carriers and encapsulated case isolates collected during an outbreak of meningococcal disease. Further paired blood‐culture isolates and unencapsulated nasopharyngeal isolates from patients with meningococcal meningitis were examined. In all unencapsulated strains analysed we found an insertion or deletion within the oligo‐(dC) stretch within siaD, resulting in a frameshift and loss of capsule formation. All encapsulated isolates, however, had seven dC residues at this position, indicating a correlation between capsule phase variation and bacterial invasion and the out‐break of meningococcal disease.