Extremes of pH are an occupational hazard for many microorganisms. In addition to efficient pH homeostasis, survival effectively requires a regulatory system tailoring the syntheses of molecules functioning beyond the cell boundaries (permeases, secreted enzymes, and exported metabolites) to the pH of the growth environment. Our previous work established that the zinc finger PacC transcription factor mediates such pH regulation in the fungus Aspergillus nidulans in response to a signal provided by the products of the six pal genes at alkaline ambient pH. In the presence of this signal, PacC becomes functional, activating transcription of genes expressed at alkaline pH and preventing transcription of genes expressed at acidic pH. Here we detect two forms of PacC in extracts, both forming specific retardation complexes with a PacC-binding site. Under acidic growth conditions or in acidity-mimicking pal mutants (defective in ambient pH signal transduction), the full-length form of PacC predominates. Under alkaline growth conditions or in alkalinity-mimicking pacCc mutants (independent of the ambient pH signal), a proteolysed version containing the amino-terminal approximately 40% of the protein predominates. This specifically cleaved shorter version is clearly functional, both as an activator for alkaline-expressed genes and as a repressor for acid-expressed genes, but the full-length form of PacC must be inactive. Thus, PacC proteolysis is an essential and pH-sensitive step in the regulation of gene expression by ambient pH. Carboxy-terminal truncations, resulting in a gain-of-function (pacCc) phenotype, bypass the requirement for the pal signal transduction pathway for conversion of the full-length to the proteolyzed functional form.