The sigma(E) (RpoE) transcription factor of Escherichia coli regulates the expression of genes whose products are devoted to extracytoplasmic activities. The sigma(E) regulon is induced upon misfolding of proteins in the periplasm or the outer membrane. Similar to other alternative sigma factors, the activity of sigma(E) is tightly regulated in E. coli. We have previously shown that sigma(E) is positively autoregulated at the transcriptional level. DNA sequencing, coupled with transcriptional analyses, have shown that sigma(E) is encoded by the first gene of a four-gene operon. The second gene of this operon, rseA, encodes an anti-sigma(E) activity. This was demonstrated at both the genetic and biochemical levels. For example, mutations in rseA constitutively increase sigma(E) activity. Consistent with this, overproduction of RseA leads to an inhibitory effect on sigma(E) activity. Topological analysis of RseA suggests the existence of one transmembrane domain, with the N-terminal part localized in the cytoplasm. Overproduction of this N-terminal domain alone was shown to inhibit sigma(E) activity. These observations were confirmed in vitro, because either purified RseA or only its purified N-terminal domain inhibited transcription from Esigma(E)-dependent promoters. Furthermore, RseA and sigma(E) co-purify, and can be co-immunoprecipitated, and chemically cross-linked. The sigma(E) activity is further modulated by the products of the remaining genes in this operon, rseB and rseC. RseB is a periplasmic protein, which negatively regulates sigma(E) activity and specifically interacts with the C-terminal periplasmic domain of RseA. In contrast, RseC is an inner membrane protein that positively modulates sigma(E) activity. Most of these protein-protein interactions were verified in vivo using the yeast two-hybrid system.