An "environmental phosphatase" controls bacterial transcriptional responses through alternative sigma factor subunits of RNA polymerase and a partner switching mechanism has been proposed to mediate phosphatase regulation. In many bacteria, the environmental phosphatase and multiple regulators are encoded in separate genes whose products form transient complexes. In contrast, in the Mycobacterium tuberculosis homolog, Rv1364c, the phosphatase is fused to two characteristic regulatory modules with sequence similarities to anti-sigma factor kinases and anti-anti-sigma factor proteins. Here we exploit this fusion to explore interactions between the phosphatase and the regulatory domains. We show quantitatively that the anti-sigma factor kinase domain activates the phosphatase domain, the kinase-phosphatase fusion protein autophosphorylates in Escherichia coli, and phosphorylation is antagonized by the phosphatase activity. Small angle x-ray scattering defines solution structures consistent with the interdomain communication observed biochemically. Taken together, these data indicate that Rv1364c provides a single chain framework to understand the structure, function, and regulation of environmental phosphatases throughout the bacterial kingdom.