All organisms respond to their environment to some extent, and for many microbes the variation in environment can be enormous. An important asset for coping with environmental variation is physiological versatility--a hallmark of many fungi. The ability of fungi to thrive over a wide range of pH is partly due to a genetic regulatory system that tailors gene expression to the ambient pH. Here we focus on the pH regulatory system of Aspergillus nidulans, where a novel signal transduction (pal) pathway mediates the first of two steps in the proteolytic processing of a transcription factor (PacC). Such processing is reminiscent of that of some well-known higher eukaryotic transcription factors, such as Cubitus interruptus, NF-kappa B and sterol regulatory element binding proteins. Intriguingly, endocytosis seems to be connected to pH signalling.