Quorum-sensing signal autoinducer 2 (AI-2) stimulates Escherichia coli biofilm formation through the motility regulator MqsR that induces expression of the putative transcription factor encoded by yncC. Here, we show that YncC increases biofilm formation by repressing overproduction of the exopolysaccharide identified as colanic acid (corroborated by decreasing mucoidy and increased sensitivity to bacteriophage P1 infection). Differential gene expression and gel shift assays demonstrated that YncC is a repressor of the predicted periplasmic protein-encoding gene, ybiM, which was corroborated by the isogenic yncC ybiM double mutation that repressed the yncC phenotypes (biofilm formation, colanic acid overproduction, mucoidy and bacteriophage resistance). Through nickel-enrichment DNA microarrays and additional gel shift assays, we found that the putative transcription factor B3023 (directly upstream of mqsR) binds the yncC promoter. Overexpressing MqsR, AI-2 import regulators LsrR/LsrK and AI-2 exporter TqsA induced yncC transcription, whereas the AI-2 synthase LuxS and B3023 repressed yncC. MqsR has a toxic effect on E. coli bacterial growth, which is partially reduced by the b3023 mutation. Therefore, AI-2 quorum-sensing control of biofilm formation is mediated through regulator MqsR that induces expression of the transcription factor YncC. YncC inhibits the expression of periplasmic YbiM, which prevents overproduction of colanic acid (excess colanic acid causes mucoidy) and prevents YbiM from inhibiting biofilm formation.