Poly-N-acetylglucosamine (PNAG) is an important Staphylococcus aureus virulence factor. It is a major component of the extracellular polymeric matrix in biofilms, and contributes to resistance to the innate immune response. The proteins encoded in the icaADBC (intercellular adhesin) operon are responsible for PNAG production. Here, we present evidence of a new mechanism of phase variation for switching off PNAG production that involves slipped strand mutagenesis, along with further insight into the regulation and expression of the icaADBC operon. S. aureus strain MN8m (mucoid) is a spontaneous mutant of strain MN8 (non-mucoid). It is characterized by constitutive overproduction of PNAG, resulting from a 5 bp deletion in the icaADBC promoter region. First, we explored the effect of this mutation on the binding of the positive regulator SarA and its regulation of icaADBC in MN8m; and demonstrated that while binding is not inhibited by the MN8m promoter mutation, it appears that SarA exhibits a negative influence on transcriptional activation in this strain background. Second, we found that non-mucoid mutants were frequently detected in MN8m cultures. The PNAG mutants still exhibited elevated icaADBC transcript levels and the 5 bp deletion was still present, but they were PNAG-negative. The most frequent mutation responsible for the phenotype was a slipped strand mispairing in the icaC gene. We found that, in vitro, PNAG-negative mutants had a growth advantage and increased fitness relative to the mucoid, PNAG-overproducing strain. Therefore, the slipped strand mutants in the PNAG-off state had a competitive growth advantage and eventually predominated the culture. Reversion back to mucoid occurred but revertants were isolated infrequently, due to their compromised fitness. The region of slipped strand mispairing was found to vary in several clinical S. aureus isolates, indicating in vivo relevance of this new mechanism. Third, a non-mucoid variant was isolated with the same phenotype and growth properties that instead had a nonsense mutation in icaB, which has demonstrated that there is a polar translational relationship between icaB and icaC. Together, these studies have given us insight into the regulation and expression of icaADBC expression and have revealed a growth disadvantage associated with PNAG overproduction.