σ factors provide RNA polymerase with promoter specificity in bacteria. Some σ factors require activation in order to interact with RNA polymerase and transcribe target genes. The Extra-Cytoplasmic Function (ECF) σ factor, σV, is encoded by several Gram-positive bacteria and is specifically activated by lysozyme. This activation requires the proteolytic destruction of the anti-σ factor RsiV via a process of regulated intramembrane proteolysis (RIP). In many cases proteases that cleave at site-1 are thought to directly sense a signal and initiate the RIP process. We previously suggested binding of lysozyme to RsiV initiated the proteolytic destruction of RsiV and activation of σV. Here we determined the X-ray crystal structure of the RsiV-lysozyme complex at 2.3 Å which revealed that RsiV and lysozyme make extensive contacts. We constructed RsiV mutants with altered abilities to bind lysozyme. We find that mutants that are unable to bind lysozyme block site-1 cleavage of RsiV and σV activation in response to lysozyme. Taken together these data demonstrate that RsiV is a receptor for lysozyme and binding of RsiV to lysozyme is required for σV activation. In addition, the co-structure revealed that RsiV binds to the lysozyme active site pocket. We provide evidence that in addition to acting as a sensor for the presence of lysozyme, RsiV also inhibits lysozyme activity. Thus we have demonstrated that RsiV is a protein with multiple functions. RsiV inhibits σV activity in the absence of lysozyme, RsiV binds lysozyme triggering σV activation and RsiV inhibits the enzymatic activity of lysozyme.