Non-coding small RNAs (sRNAs) play a major role in post-transcriptional regulation of gene expression. Of the 80 sRNAs that have been identified in E. coli, one-third bind to the RNA chaperone Hfq. Hfq both stabilizes these sRNAs in vivo and stimulates pairing to targets in vitro. A novel Hfq-dependent RNA, called here MgrR, was identified by its ability to bind Hfq. Expression of MgrR requires the PhoQ/PhoP two-component system; the PhoP response regulator is active under low Mg2+ concentrations and is an important virulence regulator in Salmonella; mgrR is also found in Salmonella species. Negatively regulated targets of MgrR identified using microarrays include eptB, involved in lipopolysaccharide (LPS) modification, and ygdQ, encoding a hypothetical protein. Cell sensitivity to the antimicrobial polymyxin B is affected by LPS modifications, and cells carrying an mgrR deletion were approximately 10 times more resistant than wild-type cells to polymyxin B. Thus, lower Mg2+ concentrations, sensed by PhoQ/PhoP, lead to expression of MgrR, changing LPS. sRNAs have previously been shown to regulate many outer membrane proteins. This work demonstrates that LPS, a major contributor of bacterial interactions with mammalian cells, is also subject to regulation by sRNAs.