The cII gene product of bacteriophage lambda is unstable and required for the establishment of lysogenization. Its intracellular amount is important for the decision between lytic growth and lysogenization. Two genetic loci of Escherichia coli are crucial for these commitments of infecting lambda genome. One of them, hflA encodes the HflKC membrane protein complex, which has been believed to be a protease degrading the cII protein. However, both its absence and overproduction stabilized cII in vivo and the proposed serine protease-like sequence motif in HflC was dispensable for the lysogenization control. Moreover, the HflKC protein was found to reside on the periplasmic side of the plasma membrane. In contrast, the other host gene, ftsH (hflB) encoding an integral membrane ATPase/protease, is positively required for degradation of cII, since loss of its function stabilized cII and its overexpression accelerated the cII degradation. In vitro, purified FtsH catalyzed ATP-dependent proteolysis of cII and HflKC antagonized the FtsH action. These results, together with our previous finding that FtsH and HflKC form a complex, suggest that FtsH is the cII degrading protease and HflKC is a modulator of the FtsH function. We propose that this transmembrane modulation differentiates the FtsH actions to different substrate proteins such as the membrane-bound SecY protein and the cytosolic cII protein. This study necessitates a revision of the prevailing view about the host control over lambda lysogenic decision.