Two component systems (TCSs) can be envisaged as complex molecular devices that help the bacteria to sense its environment and respond aptly. 41 TCSs are predicted in Bacillus anthracis, a potential bioterrorism agent, of which only four have been studied so far. Thus, the intricate signaling network contributed by TCSs remains largely unmapped in B. anthracis and needs comprehensive exploration. In this study, we functionally characterized one such system composed of BAS0540 (Response regulator) and BAS0541 (Histidine kinase). BAS0540-BAS0541, the closest homolog of CiaRH of Streptococcus in B. anthracis, forms a functional TCS with BAS0541 displaying autophosphorylation and subsequent phosphotransfer to BAS0540. BAS0540 was also found to accept phosphate from physiologically relevant small molecule phosphodonors like acetyl phosphate and carbamoyl phosphate. Results of qRT-PCR and immunoblotting demonstrated that BAS0540 exhibits a constitutive expression throughout the growth of B. anthracis. Regulon prediction for BAS0540 in B. anthracis was done in silico using the consensus DNA binding sequence of CiaR of Streptococcus. The predicted regulon of BAS0540 comprised of 23 genes, which could be classified into 8 functionally diverse categories. None of the proven virulence factors were a part of the predicted regulon, an observation contrasting with the regulon of CiaRH in Streptococci. Electrophoretic mobility shift assay was used to show direct binding of purified BAS0540 to the upstream regions of 5 putative regulon candidates- BAS0540 gene itself; a gene predicted to encode cell division protein FtsA; a self-immunity gene; a RND family transporter gene and a gene encoding stress (heat) responsive protein. A significant enhancement in the DNA binding ability of BAS0540 was observed upon phosphorylation. Overexpression of response regulator BAS0540 in B. anthracis led to a prodigious increase of ~6 folds in the cell length, thereby conferring it a filamentous phenotype. Furthermore, the sporulation titer of the pathogen also decreased markedly by ~16 folds. Thus, this study characterizes a novel TCS of B. anthracis and elucidates its role in two of the most important physiological processes of the pathogen: cell division and sporulation.