The paa genes for phenylacetic acid (PA) catabolism encode the best characterized aerobic hybrid route involved in the bacterial degradation of aromatic compounds. Here, we demonstrate that the divergent paaZ and paaA-K catabolic operons of Escherichia coli are regulated by two genes, paaXY, that form a distinct transcriptional unit driven by the Px promoter. In vivo and in vitro approaches using purified PaaX regulatory protein revealed that this regulator is able to bind and inhibit the activity of Px in a phenylacetyl-coenzyme A (PA-CoA) dependent manner. The autoregulation of paaXY is due to the competition between PaaX and RNA polymerase for binding to the regulatory Px promoter. Whereas a similar mechanism of repression mediated by PaaX was shown to occur at the catabolic Pz promoter; the catabolic Pa promoter is inhibited by PaaX by a mechanism that does not involves competition with RNA polymerase. We have shown for the first time that the paaY gene product is essential for an efficient growth in PA. Purified PaaY was shown to be a trimer in solution with a broad thioesterase activity stimulated by some metals. This thioesterase activity will allow the detoxification of some CoA-intermediates that block the aerobic catabolism of PA, as previously suggested, but also will avoid the accumulation of some CoA derivatives that could behave as antagonists of the inducer effect caused by PA-CoA on the PaaX repressor for an efficient expression of the paa genes. This regulatory function mediated by PaaY constitutes an additional regulatory checkpoint that makes the circuit that controls the transcription of the paa genes more complex than previously thought, and it could represent a general strategy present in most bacterial paa gene clusters that also harbour the paaY gene.