The narX, narQ and narL genes of Escherichia coli encode a nitrate-responsive two-component regulatory system that controls the expression of many anaerobic electron-transport- and fermentation-related genes. When nitrate is present, the NarX and NarQ sensor-transmitter proteins function to activate the response-regulator protein, NarL, which in turn binds to its DNA-recognition sites to modulate gene expression. The sensor-transmitter proteins are anchored in the cytoplasmic membrane by two transmembrane domains that are separated by a periplasmic region of ≈115 amino acids. In this study we report the isolation and characterization of narX* (star) mutants that constitutively activate nitrate reductase (narGHJI) gene expression and repress fumarate reductase (frdABCD) gene expression when no nitrate is provided for the cell. An additional narX mutant was identified that has lost its ability to respond to environmental signals. Each narX defect was caused by a single amino acid substitution within a conserved 17 amino acid sequence, called the ‘P-box’, in the periplasmic exposed region of the NarX protein. As a result, DNA binding is then ‘locked-on’ or ‘locked-off’ to give the observed pattern of gene expression. Diploid analysis of these narX mutants showed that a NarX P-box mutant which confered a ‘locked-on’ phenotype was trans dominant over wild-type NarX. Both were also trans dominant over the NarX P-box mutant which conferred a ‘locked-off’ phenotype. Certain narX P-box mutations, when combined with a narX‘linker’ region mutation, were recessive to the NarX linker mutation. Finally, a truncated form of the NarX protein that lacked the periplasmic and membrane regions also showed a ‘locked-on’ phenotype in vivo. Thus, the periplasmic and membrane domains are essential for signal transduction to NarL. From these findings, we propose that nitrate is detected in the periplasmic space of the cell, and that a signal-transduction event through the cytoplasmic membrane into the interior of the cell modulates the NarX-dependent phosphorylation/dephosphorylation of NarL.