Cell-specific activation of transcription factor sigmaF during sporulation in Bacillus subtilis requires the formation of the polar septum and the activity of a serine phosphatase (SpoIIE) located in the septum. The SpoIIE phosphatase indirectly activates sigmaF by dephosphorylating a protein (SpoIIAA-P) in the pathway that controls the activity of the transcription factor. By use of a SpoIIE-GFP fusion protein in time-course and time-lapse experiments and by direct visualization of septa in living cells, we show that SpoIIE is present in the predivisional sporangium, where it often localizes near both cell poles in structures known as E-rings. We also present evidence consistent with the view that SpoIIE is present in both progeny cells after polar division. These findings are incompatible with a model for the control of sigmaF activity in which the phosphatase is simply sequestered to one cell. Instead, we conclude that the function of SpoIIE is subject to regulation, and we present evidence that this occurs in two stages. The first stage, which involves the phosphatase function of SpoIIE, depends on the cell division protein FtsZ and could correspond to the FtsZ-dependent assembly of SpoIIE into E-rings. The second stage occurs after the dephosphorylation of SpoIIAA-P and is dependent on the later-acting, cell-division protein DivIC. Evidence based on the use of modified and mutant forms of the phosphatase protein indicates that SpoIIE blocks the capacity of unphosphorylated SpoIIAA to activate sigmaF until formation of the polar septum is completed.