The bgl operon of Escherichia coli encodes all functions necessary for the regulated uptake and utilization of aryl beta-glucosides. The operon is unusual, however, in that it is cryptic in wild-type strains, requiring activation by mutational events. The vast majority of these mutations are due to transposition of insertion elements into the promoter region of the operon. In this report we show that integration of IS5 into the vicinity of the bgl promoter (P0) enhances its activity by greater than 60-fold thereby activating the operon. In the activated state the operon is subject to induction by substrate. Recent studies have shown that induction of the bgl operon by substrate involves antitermination within the leader of the operon. We now show that substrate-dependent regulation involves specific termination/antitermination of transcription at two signal structures flanking the first gene of the operon, bglG. Antitermination is mediated by the product of gene bglG. In the absence of substrate this antitermination is prevented by the action of the product of gene bglF (the second gene of the operon), which encodes the beta-glucoside-specific transport protein (enzymeIIBgl of the phosphoenolpyruvate-dependent phosphotransferase system, PTS) resulting in repression of the operon. The bgl promoter (P0) is not subject to substrate-dependent regulation. The bgl operon has two additional promoters (P1 and P2) located within the terminators, which could also participate in regulation.