The rice XA21 pattern recognition receptor binds a type I secreted sulfated peptide, called axY(S)22, derived from the Ax21 (activator of XA21-mediated immunity) protein. The conservation of Ax21 in all sequenced Xanthomonas spp. and closely related genera suggests that Ax21 serves a key biological function. Here we show that the predicted N-terminal sequence of Ax21 is cleaved prior to secretion outside the cell and that mature Ax21 serves as a quorum sensing (QS) factor in Xanthomonas oryzae pv. oryzae. Ax21-mediated QS controls motility, biofilm formation and virulence. We provide genetic evidence that the Xoo RaxH histidine kinase serves as the bacterial receptor for Ax21. This work establishes a critical role for small protein-mediated QS in a Gram-negative bacterium.