ABSTRACT The CpxRA signal transduction system, which in Escherichia coli regulates surface structure assembly and envelope maintenance, is involved in the pathogenic and mutualistic interactions of the entomopathogenic bacterium Xenorhabdus nematophila . When Δ cpxR1 cells were injected into Manduca sexta insects, the time required to kill 50% of the insects was twofold longer than the time observed for wild-type cells and the Δ cpxR1 cells ultimately killed 16% fewer insects than wild-type cells killed. During mutualistic colonization of Steinernema carpocapsae nematodes, the Δ cpxR1 mutant achieved colonization levels that were only 38% of the wild-type levels. Δ cpxR1 cells exhibited an extended lag phase when they were grown in liquid LB or hemolymph, formed irregular colonies on solid medium, and had a filamentous cell morphology. A mutant with a cpxRp-lacZ fusion had peaks of expression in the log and stationary phases that were conversely influenced by CpxR; the Δ cpxR1 mutant produced 130 and 17% of the wild-type β-galactosidase activity in the log and stationary phases, respectively. CpxR positively influences motility and secreted lipase activity, as well as transcription of genes necessary for mutualistic colonization of nematodes. CpxR negatively influences the production of secreted hemolysin, protease, and antibiotic activities, as well as the expression of mrxA , encoding the pilin subunit. Thus, X. nematophila CpxRA controls expression of envelope-localized and secreted products, and its activity is necessary for both mutualistic and pathogenic functions.