Lipopolysaccharide (LPS) resides in the outer membrane of Gram-negative bacteria where it is responsible for barrier function1,2. LPS can cause death as a result of septic shock, and its lipid A core is the target of polymyxin antibiotics3,4. Despite the clinical importance of polymyxins and the emergence of multidrug resistant strains5, our understanding of the bacterial factors that regulate LPS biogenesis is incomplete. Here we characterize the inner membrane protein PbgA and report that its depletion attenuates the virulence of Escherichia coli by reducing levels of LPS and outer membrane integrity. In contrast to previous claims that PbgA functions as a cardiolipin transporter6-9, our structural analyses and physiological studies identify a lipid A-binding motif along the periplasmic leaflet of the inner membrane. Synthetic PbgA-derived peptides selectively bind to LPS in vitro and inhibit the growth of diverse Gram-negative bacteria, including polymyxin-resistant strains. Proteomic, genetic and pharmacological experiments uncover a model in which direct periplasmic sensing of LPS by PbgA coordinates the biosynthesis of lipid A by regulating the stability of LpxC, a key cytoplasmic biosynthetic enzyme10-12. In summary, we find that PbgA has an unexpected but essential role in the regulation of LPS biogenesis, presents a new structural basis for the selective recognition of lipids, and provides opportunities for future antibiotic discovery.