Upon sensing misfolded outer-membrane porins (OMPs) in the periplasm, the E. coli DegS protease cleaves RseA, a transmembrane regulator, transmitting a signal to activate cytoplasmic gene expression. Misfolding is detected by binding of normally inaccessible OMP sequences to the DegS-PDZ domain, which relieves allosteric inhibition and activates proteolysis. Here we show that DegS stimulation can be regulated by OMP peptide affinity for the active and for the inactive protease conformations, as well as by preferential substrate binding to active DegS. Based on the effects of mutations in the peptide-binding pocket of the PDZ domain and elsewhere, we suggest an allosteric pathway that links peptide binding to DegS activation. These results explain fast responses to envelope stress; demonstrate that the protein-unfolding response, even under catastrophic conditions, can be tailored by the peptide sequences that become accessible to DegS; and suggest strategies for control of related PDZ proteases by allosteric effectors.