The mechanism of Pi interaction with phosphate binding protein of Escherichia coli has been investigated using the A197C mutant protein labeled with a coumarin fluorophore (MDCC-PBP), which gives a fluorescence change on binding Pi. A pure preparation of MDCC-PBP was obtained, in which the only significant inhomogeneity is the presence of equal amounts of two diastereoisomers due to the chiral center formed on reaction of the cysteine with the maleimide. These diastereoisomers could not be separated, but Pi binding data suggest that they differ in affinity and fluorescence change. When Pi binds to MDCC-PBP, the fluorescence quantum yield increases 8-fold and the fluorescence intensity at 465 nm increases 13-fold. The kinetics of Pi binding show saturation of the rate at high Pi concentrations, and this together with other information suggests a two-step mechanism with the fluorescence change after binding, concomitant with a conformational change of the protein that closes the cleft containing the Pi binding site. Cleft closure has a rate constant of 317 s-1 (pH 7.0, 5 degrees C), and opening has a rate constant of 4.5 s-1. The fluorescence increase is likely to arise from a change in the hydrophobic environment during this closure as the steady state fluorescence emission (lambdamax and intensity) on Pi binding is mimicked by the addition of ethanol to aqueous solutions of an MDCC-thiol adduct. Fluorescence lifetimes in the absence and presence of Pi were 0.3 and 2.4 ns, respectively, consistent with the change in quantum yield. The rotational correlation time of the coumarin increases only 2-fold from 15 to 26 ns on binding Pi as measured by time-resolved polarization, consistent with the main rotation being determined by the protein even in the open conformation, but with greater local motion. Circular dichroism of the coumarin induced by the protein is weak in the absence of Pi and increases strongly upon saturation by Pi. These data are also consistent with an open to closed conformational model.