Heme, a major iron source, is transported through the outer membrane of Gram-negative bacteria by specific heme/hemoprotein receptors and through the inner membrane by heme-specific, periplasmic, binding protein-dependent, ATP-binding cassette permeases. Escherichia coli K12 does not use exogenous heme, and no heme uptake genes have been identified. Nevertheless, a recombinant E. coli strain expressing just one foreign heme outer membrane receptor can use exogenous heme as an iron source. This result suggests either that heme might be able to cross the cytoplasmic membrane in the absence of specific carrier or that there is a functional inner membrane heme transporter. Here, we show that to use heme iron E. coli requires the dipeptide inner membrane ATP-binding cassette transporter (DppBCDF) and either of two periplasmic binding proteins: MppA, the L-alanyl-gamma-D-glutamyl-meso-diaminopimelate binding protein, or DppA, the dipeptide binding protein. Thus, wild-type E. coli has a peptide/heme permease despite being unable to use exogenous heme. DppA, which shares sequence similarity with the Haemophilus influenzae heme-binding protein HbpA, and MppA are functional heme-binding proteins. Peptides compete with heme for binding both "in vitro" and "in vivo."