Iron is essential for all organisms but can be toxic in excess. Iron homeostasis is typically regulated by cytoplasmic iron binding proteins, but here we describe a signal transduction system (PmrA/PmrB) that responds to extracytoplasmic ferric iron. Iron promoted transcription of PmrA-activated genes and resistance to the antibiotic polymyxin in Salmonella. The PmrB protein bound iron via its periplasmic domain which harbors two copies of the sequence ExxE, a motif present in the Saccharomyces FTR1 iron transporter and in mammalian ferritin light chain. A pmrA mutant was hypersensitive to killing by iron but displayed wild-type resistance to a variety of oxidants, suggesting PmrA/PmrB controls a novel pathway mediating the avoidance of iron toxicity.