Escherichia coli senses envelope stress using a signaling cascade initiated when DegS cleaves a transmembrane inhibitor of a transcriptional activator for response genes. Each subunit of the DegS trimer contains a protease domain and a PDZ domain. During stress, unassembled outer-membrane proteins (OMPs) accumulate in the periplasm and their C-terminal peptides activate DegS by binding to its PDZ domains. In the absence of stress, autoinhibitory interactions, mediated by the L3 loop, stabilize inactive DegS, but it is not known how this autoinhibition is reversed during activation. Here, we show that OMP peptides initiate a steric clash between the PDZ domain and the L3 loop that results in a structural rearrangement of the loop and breaking of autoinhibitory interactions. Many different L3-loop sequences are compatible with activation but those that relieve the steric clash reduce OMP activation dramatically. Our results provide a compelling molecular mechanism for allosteric activation of DegS by OMP-peptide binding.regulated intracellular proteolysis | allosteric regulation | outer-membrane proteins | stress sensor T he Escherichia coli DegS protease is anchored to the periplasmic face of the inner membrane, where it functions to sense outer-membrane stress (1, 2). DegS is only activated when outer-membrane proteins (OMPs) accumulate in the periplasm as a consequence of stresses that compromise normal membrane insertion. The C-terminal peptides of these unassembled OMPs bind DegS and activate cleavage of the periplasmic portion of RseA (3), a transmembrane protein with a cytoplasmic domain that binds and inhibits the σ E transcription factor (4). This cleavage event initiates a proteolytic cascade that ultimately releases σ E to stimulate transcription of stress-response genes (5). Under nonstress conditions, OMPs do not accumulate in the periplasm, DegS cleavage of RseA is minimal, and σ E remains bound to the cytoplasmic domain of RseA in an inactive state (1, 2).Each DegS subunit contains a membrane anchor, a trypsinlike protease domain, and a PDZ domain, which binds OMP Cterminal peptides (3). Crystal structures of DegS in active and inactive conformations reveal that the protease domains pack together to form a trimer with the PDZ domains located on the periphery (6, 7). Activation of DegS is generally well-described by a two-state allosteric model in which the preferential binding of both RseA and OMP peptides to the active conformation of the enzyme stabilizes this species in a positively cooperative manner (8) (Fig. 1). As expected for this model, OMP binding to a single PDZ domain can activate cis and trans protease domains (9). The most activating OMP peptide (YYF) increases DegS activity ∼1,000-fold, although other peptides activate to lesser extents because they bind active DegS less tightly or inactive DegS more tightly (8). Activation involves the rearrangement of a network of conserved residues at each subunit interface as well as the formation of a functional oxyanion hole at each catalytic si...