Subunit epsilon of bacterial and chloroplast F(O)F(1)-ATP synthase is responsible for inhibition of ATPase activity. In Bacillus PS3 enzyme, subunit epsilon can adopt two conformations. In the "extended", inhibitory conformation, its two C-terminal alpha-helices are stretched along subunit gamma. In the "contracted", noninhibitory conformation, these helices form a hairpin. The transition of subunit epsilon from an extended to a contracted state was studied in ATP synthase incorporated in Bacillus PS3 membranes at 59 degrees C. Fluorescence energy resonance transfer between fluorophores introduced in the C-terminus of subunit epsilon and in the N-terminus of subunit gamma was used to follow the conformational transition in real time. It was found that ATP induced the conformational transition from the extended to the contracted state (half-maximum transition extent at 140 microM ATP). ADP could neither prevent nor reverse the ATP-induced conformational change, but it did slow it down. Acid residues in the DELSEED region of subunit beta were found to stabilize the extended conformation of epsilon. Binding of ATP directly to epsilon was not essential for the ATP-induced conformational change. The ATP concentration necessary for the half-maximal transition (140 microM) suggests that subunit epsilon probably adopts the extended state and strongly inhibits ATP hydrolysis only when the intracellular ATP level drops significantly below the normal value.