Nitrogen-regulation of gene transcription in Escherichia coli results from the regulation of the phosphorylation state of the enhancer-binding transcription factor NRI (NtrC). We examined the regulation of NRI phosphorylation in a reconstituted bicyclic cascade system containing four regulatory proteins: NRI, the signal-transducing uridylyltransferase/uridylyl-removing enzyme (UTase/UR), its substrate the signal transduction protein PII, and the kinase/phosphatase NRII (NtrB), which is a PII receptor that phosphorylates and dephosphorylates NRI. In this reconstituted system, the phosphorylation state of NRI was regulated reciprocally by the small molecule effectors glutamine, which prevented the accumulation of NRI-P, and 2-ketoglutarate, which caused accumulation of NRI-P. Regulation of the bicyclic system by glutamine was exclusively due to sensation and signal-transduction by the UTase/UR-PII monocycle, which was observed to function essentially as a glutamine-sensing apparatus. In contrast, regulation of NRI phosphorylation by 2-ketoglutarate, which binds to PII, was due to direct regulation of the NRII-PII interaction and the rate of NRI-P dephosphorylation. Thus, the PII protein transduces the glutamine signal to the NRII-NRI monocycle in the form of its uridylylation state and is also the receptor of the antagonistic 2-ketoglutarate signal, which blocks the activity of unmodified PII.