A regulatory gene-like open reading frame oriented oppositely to mdcL, coined mdcY, was found upstream from the structural genes of the mdcLMACDEGBH operon in Acinetobacter calcoaceticus KCCM 40902. To elucidate the function of this gene, mdcY was expressed in Escherichia coli, and the MdcY protein was purified to homogeneity. Its DNA binding activity and binding site were examined by gel retardation and footprinting assays in vitro and by site-directed mutagenesis of the binding sites in vivo. The regulator bound target DNA regardless of the presence of malonate, and the binding site was found centered at 65 relative to the mdcL transcriptional start site and contains a 12-bp palindromic structure (5'-ATTGTA/TACAAT-3'). Using a promoter fusion to the reporter gene luc, we found that the promoter P_mdcY is negatively regulated by MdcY independent of malonate. However, the promoter P_mdcL recovered its activity in the presence of malonate. When mdcY was introduced into A. calcoaceticus KCCM 40902 in which the gene is inactivated by an IS3 family element, malonate decarboxylase was significantly repressed in cultures growing in acetate, succinate, or Luria-Bertani medium. However, in cells growing in malonate, malonate decarboxylase was induced, indicating that MdcY is a transcriptional repressor and that malonate or a product resulting from malonate metabolism should be the intracellular inducer of the mdc operon.