Gamma-butyrolactone signalling molecules are produced by many Streptomyces species, and several have been shown to regulate antibiotic production. In Streptomyces coelicolor A3(2) at least one gamma-butyrolactone (SCB1) has been shown to stimulate antibiotic production, and genes encoding proteins that are involved in its synthesis (scbA) and binding (scbR) have been characterized. Expression of these genes is autoregulated by a complex mechanism involving the gamma-butyrolactone. In this study, additional genes influenced by ScbR were identified by DNA microarray analysis, and included a cryptic cluster of genes for a hypothetical type I polyketide. Further analysis of this gene cluster revealed that the pathway-specific regulatory gene, kasO, is a direct target for regulation by ScbR. Gel retardation and DNase I footprinting analyses identified two potential binding sites for ScbR, one at -3 to -35 nt and the other at -222 to -244 nt upstream of the kasO transcriptional start site. Addition of SCB1 eliminated the DNA binding activity of ScbR at both sites. The expression of kasO was growth phase regulated in the parent (maximal during transition phase), undetectable in a scbA null mutant, and constitutively expressed in a scbR null mutant. Addition of SCB1 to the scbA mutant restored the expression of kasO, indicating that ScbR represses kasO until transition phase, when presumably SCB1 accumulates in sufficient quantity to relieve kasO repression. Expression of the cryptic antibiotic gene cluster was undetectable in a kasO deletion mutant. This is the first report with comprehensive in vivo and in vitro data to show that a gamma-butyrolactone-binding protein directly regulates a secondary metabolite pathway-specific regulatory gene in Streptomyces.