Intended for literature instructors, this digest explains the relationship of transactional theory (a reciprocal, mutually defining relationship between the reader and the literary text) to the teaching of literature. The importance of the reader's part in literature is first demonstrated, noting that attention must be paid to who the readers are, their expectations of the text, and the choices they make as they read. The digest next differentiates between the efferent stance, in which the reader is primarily concerned with what he or she will carry away as information from the text, and the aesthetic stance, in which the reader focuses primarily upon the experience lived through during the reading. The digest notes that efferent stance is appropriate when seeking information, while the aesthetic stance is useful when the reader wishes to experience the full emotional, aesthetic, and intellectual experiences afforded by the text. Uses of transactional theory in teaching are then discussed, emphasizing the following principles: (1) the "poem" is within the reader, (2) primary responses should be considered, (3) the classroom atmosphere should be cooperative, (4) the conception of literary knowledge will be expanded, and (5) transactional analysis is related to other literary studies. The most salient principles of instruction are also outlined, including: response; giving ideas time to crystallize; and opening up the discussion to the topics of self, text, and others. (SKC)