We have investigated a signal transduction system proposed to allow Streptomyces coelicolor to sense and respond to changes in the integrity of its cell envelope. The system consists of four proteins, encoded in an operon: sigmaE, an RNA polymerase factor; CseA (formerly ORF202), a protein of unknown function; CseB, a response regulator; and CseC, a sensor histidine protein kinase with two predicted transmembrane helices (Cse stands for control of sigma E). To develop a sensitive bioassay for inducers of the sigE system, the promoter of the sigE operon (sigEp) was fused to a reporter gene conferring resistance to kanamycin. Antibiotics that acted as inducers of the sigE signal transduction system were all inhibitors of intermediate and late steps in peptidoglycan biosynthesis, including ramoplanin, moenomycin A, bacitracin, several glycopeptides and some beta-lactams. The cell wall hydrolytic enzyme lysozyme also acted as an inducer. These data suggest that the CseB-CseC signal transduction system may be activated by the accumulation of an intermediate in peptidoglycan biosynthesis or degradationa. A computer-based searching method was used to identify a sigmaE target operon of 12 genes (the cwg operon), predicted to specify the biosynthesis of a cell wall glycan. In low-Mg(2+) medium, transcription of the cwg operon was induced by vancomycin in a sigE-dependent manner but, in high-Mg(2+) medium, there was substantial cwg transcription in a sigE null mutant, and this sigE-independent activity was also induced by vancomycin. Based on these data, we propose a model for the regulation and function of the sigmaE signal transduction system.