Channeling of misfolded proteins into repair, assembly or degradation pathways is often mediated by complex and multifunctional cellular factors. Despite detailed structural information, the underlying regulatory mechanisms governing these factors are not well understood. The extracytoplasmic heat-shock factor DegP (HtrA) is a well-suited model for addressing mechanistic issues, as it is regulated by the common mechanisms of allostery and activation by oligomerization. Site-directed mutagenesis combined with refolding and oligomerization studies of chemically denatured DegP revealed how substrates trigger the conversion of the resting conformation into the active conformation. Binding of specific peptides to PDZ domain-1 causes a local rearrangement that is allosterically transmitted to the substrate-binding pocket of the protease domain. This activated state readily assembles into larger oligomeric particles, thus stabilizing the catalytically active form and providing a degradation cavity for protein substrates. The implications of these data for the mechanism of protein quality control are discussed.