Rapid proteolysis plays an important role in regulation of gene expression. Proteolysis of the phage lambda CII transcriptional activator plays a key role in the lysis-lysogeny decision by phage lambda. Here we demonstrate that the E. coli ATP-dependent protease FtsH, the product of the host ftsH/hflB gene, is responsible for the rapid proteolysis of the CII protein. FtsH was found previously to degrade the heat-shock transcription factor sigma32. Proteolysis of sigma32 requires, in vivo, the presence of the DnaK-DnaJ-GrpE chaperone machine. Neither DnaK-DnaJ-GrpE nor GroEL-GroES chaperone machines are required for proteolysis of CII in vivo. Purified FtsH carries out specific ATP-dependent proteolysis of CII in vitro. The degradation of CII is at least 10-fold faster than that of sigma32. Electron microscopy revealed that purified FtsH forms ring-shaped structures with a diameter of 6-7 nm.