The MtrAB signal transduction system, which participates in multiple cellular processes related to growth and cell wall homeostasis, is the only two-component system known to be essential in Mycobacterium. In a screen for antibiotic resistance determinants in Mycobacterium smegmatis, we identified a multidrug-sensitive mutant with a transposon insertion in lpqB, the gene located immediately downstream of mtrA–mtrB. The lpqB mutant exhibited increased cell–cell aggregation and severe defects in surface motility and biofilm growth. lpqB cells displayed hyphal growth and polyploidism, reminiscent of the morphology of Streptomyces, a related group of filamentous Actinobacteria. Heterologous expression of M. tuberculosis LpqB restored wild-type characteristics to the lpqB mutant. LpqB interacts with the extracellular domain of MtrB, and influences MtrA phosphorylation and promoter activity of dnaA, an MtrA-regulated gene that affects cell division. Furthermore, in trans expression of the non-phosphorylated, inactive form of MtrA in wild-type M. smegmatis resulted in phenotypes similar to those of lpqB deletion, whereas expression of the constitutively active form of MtrA restored wild-type characteristics to the lpqB mutant. These results support a model in which LpqB, MtrB and MtrA form a three-component system that co-ordinates cytokinetic and cell wall homeostatic processes.