Escherichia coli has homologues of the competence genes other species use for DNA uptake and processing, but natural competence and transformation have never been detected. Although we previously showed that these genes are induced by the competence regulator Sxy as in other gamma-proteobacteria, no conditions are known that naturally induce sxy expression. We have now tested whether the competence gene homologues encode a functional DNA uptake machinery and whether DNA uptake leads to recombination, by investigating the effects of plasmid-borne sxy expression on natural competence in a wide variety of E. coli strains. High- and low-level sxy expression alone did not induce transformation in any of the strains tested, despite varying the transforming DNA, its concentration, and the incubation conditions used. Direct measurements of uptake of radiolabelled DNA were below the limit of detection, however transformants were readily detected when recombination functions were provided by the lambda Red recombinase. This is the first demonstration that E. coli sxy expression can induce natural DNA uptake and that E. coli's competence genes do encode a functional uptake machinery. However, the amount of transformation cells undergo is limited both by low levels of DNA uptake and by inefficient DNA processing/recombination.