α-Proteobacteria uniquely integrate features of two-component signal transduction (TCS) and alternative sigma factor (σ) regulation to control transcription in response to general stress. The core of this regulatory system is the PhyR protein, which contains a σ-like (SL) domain and a TCS receiver domain. Aspartyl phosphorylation of the PhyR receiver in response to stress signals promotes binding of the anti-σ factor, NepR, to PhyR-SL. This mechanism, whereby NepR switches binding between its cognate σ factor and phospho-PhyR (PhyR∼P), controls transcription of the general stress regulon. We have defined the structural basis of the PhyR∼P/NepR interaction in Caulobacter crescentus and characterized the effect of aspartyl phosphorylation on PhyR structure by molecular dynamics simulations. Our data support a model in which phosphorylation of the PhyR receiver domain promotes its dissociation from the PhyR-SL domain, which exposes the NepR binding site. A highly dynamic loop-helix region (α3-α4) of the PhyR-SL domain plays an important role in PhyR∼P binding to NepR in vitro, and in stress-dependent activation of transcription in vivo. This study provides a foundation for understanding the protein-protein interactions and protein structural dynamics that underpin general stress adaptation in a large and metabolically diverse clade of the bacterial kingdom.