As well as their importance to nutrition, fatty acids (FA) represent a unique group of quorum sensing chemicals that modulate the behavior of bacterial population in virulence. However, the way in which full-length, membrane-bound receptors biochemically detect FA remains unclear. Here, we provide genetic, enzymological and biophysical evidences to demonstrate that in the phytopathogenic bacterium Xanthomonas campestris pv. campestris, a medium-chain FA diffusible signal factor (DSF) binds directly to the N-terminal, 22 amino acid-length sensor region of a receptor histidine kinase (HK), RpfC. The binding event remarkably activates RpfC autokinase activity by causing an allosteric change associated with the dimerization and histidine phosphotransfer (DHp) and catalytic ATP-binding (CA) domains. Six residues were found essential for sensing DSF, especially those located in the region adjoining to the inner membrane of cells. Disrupting direct DSF-RpfC interaction caused deficiency in bacterial virulence and biofilm development. In addition, two amino acids within the juxtamembrane domain of RpfC, Leu172 and Ala178, are involved in the autoinhibition of the RpfC kinase activity. Replacements of them caused constitutive activation of RpfC-mediated signaling regardless of DSF stimulation. Therefore, our results revealed a biochemical mechanism whereby FA activates bacterial HK in an allosteric manner, which will assist in future studies on the specificity of FA-HK recognition during bacterial virulence regulation and cell-cell communication.