The pga gene coding for penicillin G acylase (PGA) in Escherichia coli ATCC11105 was cloned, and its complete nucleotide sequence including 5`- and 3`-flanking regions was determined. Two nonidentical subunits that constitute an active PGA enzyme complex are known to be formed by processing of a common precursor molecule (1). This novel type of protein processing was confirmed by a nucleotide sequencing study together with amino acid sequencing of two PGA subunits. In addition, it was found that the initiation codon, AUG, is preceded by an authentic ribosome-binding site, a consensus promoter sequence and putative cAMP receptor protein (CRP)-binding sites, and that the termination codon, UAA, is followed by a putative transcriptional terminator. The promoter function was confirmed by galactokinase assay using galK fusion plasmids. Using the recombinant plasmids with or without the regulatory region of PGA, the regulatory site responsible for phenylacetic acid induction was elucidated.