Nucleotide sequence analysis of the mxcQ and mxcE loci, required for the synthesis of methanol dehydrogenase in Methylobacterium organophilum XX, has revealed two open reading frames that show significant similarity to sequences of prokaryotic two-component systems, especially MxaY and MxaX proteins of another methylotrophic bacterium, Paracoccus denitrificans. Cell-free extracts and DNA-column-fractionated proteins from wild-type M. organophilum XX cells grown on methanol or succinate contained protein(s) that were able to bind specifically to the upstream region of methanol dehydrogenase large subunit gene (mxaF). In contrast, cell-free extracts from mxcQ and mxcE mutant strains of M. organophilum XX had zero or reduced binding activity towards the promoter fragments of the mxaF gene. This is consistent with the involvement of the mxcQ and mxcE genes in transcriptional regulation of methanol dehydrogenase synthesis. Analyses of sequential deletions of the mxaF upstream region have defined the functional boundary of the promoter/operator region of this gene and identified one nucleotide segment as essential to the activation of mxaF.