The structural organization and regulation of the genes involved in short-chain fatty acid degradation in Escherichia coli, referred to as the ato system, have been studied by a combination of classic genetic and recombinant DNA techniques. A plasmid containing a 6.2-kilobase region of the E. coli chromosome was able to complement mutations in the ato structural genes, atoA (acetyl-coenzyme A [CoA]:acetoacetyl [AA]-CoA transferase) and atoB (thiolase II), as well as mutations in the ato regulatory locus, atoC. Complementation studies performed with mutants defective in acetyl-CoA:AA-CoA transferase suggest that two loci, atoD and atoA, are required for the expression of functional AA-CoA transferase. The ato gene products were identified by in vitro transcription and translation and maxicell analysis as proteins of 48, 26.5, 26, and 42 kilodaltons for atoC, atoD, atoA, and atoB, respectively. In vitro and insertional mutagenesis of the ato hybrid plasmid indicated that the ato structural genes were arranged as an operon, with the order of transcription atoD-atoA-atoB. Although transcribed in the same direction as the atoDAB operon, the atoC gene appeared to use a promoter which was distinct from that used by the atoDAB operon. A delta atoC plasmid expressed the atoD, atoA, and atoB gene products only in strains containing a functional atoC gene. Although the exact mechanism of control was not evident from these studies, the data suggest that the atoC gene product is an activator which is required for the synthesis or activation of the atoDAB-encoded enzymes.