The chaperone system formed by DnaK, DnaJ and GrpE mediates stress-dependent negative modulation of the Escherichia coli heat shock response, probably through association with the heat shock promoter-specific sigma32 subunit of RNA polymerase. Interactions of the DnaK system with sigma32 were analysed. DnaJ and DnaK bind free, but not RNA polymerase-bound, sigma32 with dissociation constants of 20 nM and 5 muM respectively. Association and dissociation rates of DnaJ-sigma32 complexes are 5900- and 20-fold higher respectively than those of DnaK-sigma32 complexes in the absence of ATP. ATP destabilizes DnaK-sigma32 interactions. DnaJ, through rapid association with sigma32 and stimulation of hydrolysis of DnaK-bound ATP, mediates efficient binding of DnaK to sigma32 in the presence of ATP, resulting in DnaK-DnaJ-sigma32 complexes containing ADP. GrpE binding to these complexes stimulates nucleotide release and subsequent complex dissociation by ATP. We propose that the principles of this cycle also operate in other chaperone activities of the DnaK system. DnaK and DnaJ cooperatively inhibit sigma32 activity in heat shock gene transcription and GrpE partially reverses this inhibition. These data indicate that reversible inhibition of sigma32 activity through transient association of DnaK and DnaJ is a central regulatory element of the heat shock response.