The lactose operon (lac operon) is an operon required for the transport and metabolism of lactose in E.coli and many other enteric bacteria. Although glucose is the preferred carbon source for most bacteria, the lac operon allows for the effective digestion of lactose when glucose is not available through the activity of beta-galactosidase.Gene regulation of the lac operon was the first genetic regulatory mechanism to be understood clearly, so it has become a foremost example of prokaryotic gene regulation. It is often discussed in introductory molecular and cellular biology classes for this reason. This lactose metabolism system was used by François Jacob and Jacques Monod to determine how a biological cell knows which enzyme to synthesize. Their work on the lac operon won them the Nobel Prize in Physiology in 1965.
Bacterial operons are polycistronic transcripts that are able to produce multiple proteins from one mRNA transcript. In this case, when lactose is required as a sugar source for the bacterium, the three genes of the lac operon can be expressed and their subsequent proteins translated: lacZ, lacY, and lacA. The gene product of lacZ is β-galactosidase which cleaves lactose, a disaccharide, into glucose and galactose. lacY encodes Beta-galactoside permease, a membrane protein which becomes embedded in the cytoplasmic membrane to enable the cellular transport of lactose into the cell. Finally, lacA encodes Galactoside acetyltransferase.

It would be wasteful to produce enzymes when no lactose is available or if a preferable energy source such as glucose were available. The lac operon uses a two-part control mechanism to ensure that the cell expends energy producing the enzymes encoded by the lac operon only when necessary. In the absence of lactose, the lac repressor, lacI, halts production of the enzymes encoded by the lac operon. The lac repressor is always expressed, unless a co-inducer binds to it. In other words, it is transcribed only in the presence of small molecule co-inducer. In the presence of glucose, the catabolite activator protein (CAP), required for production of the enzymes, remains inactive, and EIIAGlc shuts down lactose permease to prevent transport of lactose into the cell. This dual control mechanism causes the sequential utilization of glucose and lactose in two distinct growth phases, known as diauxie.
The lac operon consists of 3 structural genes, and a promoter, a terminator, regulator, and an operator. The three structural genes are: lacZ, lacY, and lacA.
lacZ encodes β-galactosidase (LacZ), an intracellular enzyme that cleaves the disaccharide lactose into glucose and galactose.
lacY encodes Beta-galactoside permease (LacY), a transmembrane symporter that pumps β-galactosides including lactose into the cell using a proton gradient in the same direction. Permease increases the permeability of the cell to β-galactosides.
lacA encodes β-galactoside transacetylase (LacA), an enzyme that transfers an acetyl group from acetyl-CoA to thiogalactoside.
The first control mechanism is the regulatory response to lactose, which uses an intracellular regulatory protein called the lactose repressor to hinder production of β-galactosidase in the absence of lactose. The lacI gene coding for the repressor lies nearby the lac operon and is always expressed (constitutive). If lactose is missing from the growth medium, the repressor binds very tightly to a short DNA sequence just downstream of the promoter near the beginning of lacZ called the lac operator. The repressor binding to the operator interferes with binding of RNAP to the promoter, and therefore mRNA encoding LacZ and LacY is only made at very low levels. When cells are grown in the presence of lactose, however, a lactose metabolite called allolactose, made from lactose by the product of the lacZ gene, binds to the repressor, causing an allosteric shift. Thus altered, the repressor is unable to bind to the operator, allowing RNAP to transcribe the lac genes and thereby leading to higher levels of the encoded proteins.

The second control mechanism is a response to glucose, which uses the catabolite activator protein (CAP) homodimer to greatly increase production of β-galactosidase in the absence of glucose. Cyclic adenosine monophosphate (cAMP) is a signal molecule whose prevalence is inversely proportional to that of glucose. It binds to the CAP, which in turn allows the CAP to bind to the CAP binding site (a 16 bp DNA sequence upstream of the promoter on the left in the diagram below, about 60 bp upstream of the transcription start site),[6] which assists the RNAP in binding to the DNA. In the absence of glucose, the cAMP concentration is high and binding of CAP-cAMP to the DNA significantly increases the production of β-galactosidase, enabling the cell to hydrolyse lactose and release galactose and glucose.