The paa cluster of Escherichia coli W involved in the aerobic catabolism of phenylacetic acid (PA) has been cloned and sequenced. It was shown to map at min 31.0 of the chromosome at the right end of the mao region responsible for the transformation of 2-phenylethylamine into PA. The 14 paa genes are organized in three transcription units: paaZ and paaABCDEFGHIJK, encoding catabolic genes; and paaXY, containing the paaX regulatory gene. The paaK gene codes for a phenylacetyl-CoA ligase that catalyzes the activation of PA to phenylacetyl-CoA (PA-CoA). The paaABCDE gene products, which may constitute a multicomponent oxygenase, are involved in PA-CoA hydroxylation. The PaaZ protein appears to catalyze the third enzymatic step, with the paaFGHIJ gene products, which show significant similarity to fatty acid beta-oxidation enzymes, likely involved in further mineralization to Krebs cycle intermediates. Three promoters, Pz, Pa, and Px, driven the expression of genes paaZ, paaABCDEFGHIJK, and paaX, respectively, have been identified. The Pa promoter is negatively controlled by the paaX gene product. As PA-CoA is the true inducer, PaaX becomes the first regulator of an aromatic catabolic pathway that responds to a CoA derivative. The aerobic catabolism of PA in E. coli represents a novel hybrid pathway that could be a widespread way of PA catabolism in bacteria.