Abstract: The extracytoplasmic function (ECF) sigma factor, sigmaE, is required for normal cell wall integrity in Streptomyces coelicolor. We have investigated the regulation of sigmaE through a transcriptional and mutational analysis of sigE and the surrounding genes. Nucleotide sequencing identified three genes located downstream of sigE; orf202, cseB and cseC (cse, control of sigE ). cseB and cseC encode a putative response regulator and a putative transmembrane sensor histidine protein kinase respectively. Although most sigE transcription appeared to be monocistronic, sigE was also transcribed as part of a larger operon, including at least orf202. sigE null mutants are sensitive to cell wall lytic enzymes, have an altered peptidoglycan muropeptide profile, and on medium deficient in Mg2+ they overproduce actinorhodin, sporulate poorly and form crenellated colonies. A constructed cseB null mutant appeared to have the same phenotype as a sigE null mutant, which was accounted for by the observed absolute dependence of the sigE promoter on cseB. It is likely that the major role of cseB is to regulate sigE transcription because expression of sigE alone from a heterologous promoter suppressed the cseB mutation. Mg2+ suppresses the CseB/SigE phenotype, probably by stabilizing the cell envelope, and sigE transcript levels were consistently higher in Mg2+-deficient cultures than in high Mg2+-grown cultures. We propose a model in which the CseB/CseC two-component system modulates activity of the sigE promoter in response to signals from the cell envelope.