We report the discovery of two genes from Rhizobium meliloti, fixL and fixJ, which are positive regulators of symbiotic expression of diverse nitrogen fixation (nif and fix) genes. nif gene regulation is shown to consist of a cascade: the fixLJ genes activate nifA, which in turn activates nifHDK and fixABCX. Like nifA, fixN can be induced in free-living microaerobic cultures of R. meliloti, indicating a major physiological role for oxygen in nif and fix gene regulation. Microaerobic expression of fixN and nifA depends on fixL and fixJ. The FixL and FixJ proteins belong to a family of two-component regulatory systems widely spread among prokaryotes and responsive to the cell environment. We propose that FixL, which has features of a transmembrane protein, senses an environmental signal and transduces it to FixJ, a transcriptional activator of nif and fix genes.