<jats:p>We have purified and characterized an extracellular peptide factor that serves as a cell density signal for both competence development and sporulation in Bacillus subtilis. This competence and sporulation stimulating factor (CSF) was purified from conditioned medium (culture supernatant) based on its ability to stimulate expression of srfA (comS) in cells at low cell density. CSF is a 5-amino-acid peptide, glu-arg-gly-met-thr (ERGMT), that is, the carboxy-terminal 5 amino acids of the 40-amino-acid peptide encoded by phrC. No detectable CSF was produced in a phrC null mutant. The activity of chemically synthesized CSF (ERGMT) was virtually indistinguishable from that of CSF that was purified from culture supernatants. At relatively low concentrations (1-10 nM), CSF stimulated expression of srfA, whereas high concentrations of CSF stimulated the ability of cells at low cell density to sporulate. Stimulation of srfA expression by CSF requires the oligopeptide permease encoded by spo0K, a member of the ATP-binding-cassette family of transporters, and the putative phosphatase encoded by rapC, the gene immediately upstream of phrC. RapC was found to be a negative regulator of srfA expression, suggesting that the target of RapC is the transcription factor encoded by comA. We propose that CSF is transported into the cell by the Spo0K oligopeptide permease and stimulates competence gene expression by inhibiting (either directly or indirectly) the RapC phosphatase.