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The third method of gene regulation in prokaryotic organisms involves inducible operons, which have proteins that bind to either activate or inhibit transcription depending on the local environment and the demands of the cell. The lac operon is an example of an inducible operon.

However, two requirements must be met in order for the lac operon to be active. First, there must be no or very little glucose present. Lactose must also be present, second. The lac operon won't be transcriptionally active unless lactose and glucose are both presents. The binding of the CAP protein enhances lac operon transcription in the absence of glucose. Allolactose, a byproduct of lactose, attaches to the lac repressor when lactose is present and alters its structure so that it can no longer bind to the lac operator to suppress transcription.

As was previously established, when glucose concentrations are low, E. coli can use other carbohydrates as fuel. Lactose is one such sugar source. The genes required to obtain and use the local environment's lactose are encoded by the lac operon. In this case, it is repressed.