Heme has been shown to have a crucial role in the signal transduction mechanism of the facultative photoheterotrophic bacterium Rhodobacter sphaeroides. It interacts with the transcriptional regulatory complex AppA/PpsR, in which AppA and PpsR function as the antirepressor and repressor, respectively, of photosynthesis gene expression. The mechanism, however, of this interaction remains incompletely understood. In this study, we combined electron paramagnetic resonance (EPR) spectroscopy and Förster resonance energy transfer (FRET) to demonstrate the ligation of heme in PpsR with a proposed cysteine residue. We show that heme binding in AppA affects the fluorescent properties of the dark-adapted state of the protein, suggesting a less constrained flavin environment compared with the absence of heme and the light-adapted state. We performed ultrafast transient absorption measurements in order to reveal potential differences in the dynamic processes in the full-length AppA and its heme-binding domain alone. Comparison of the CO-binding dynamics demonstrates a more open heme pocket in the holo-protein, qualitatively similar to what has been observed in the CO sensor RcoM-2, and suggests a communication path between the blue-light-using flavin (BLUF) and sensing containing heme instead of cobalamin (SCHIC) domains of AppA. We have also examined quantitatively the affinity of PpsR to bind to individual DNA fragments of the puc promoter using fluorescence anisotropy assays. We conclude that oligomerization of PpsR is initially triggered by binding of one of the two DNA fragments and observe a ∼10-fold increase in the dissociation constant Kd for DNA binding upon heme binding to PpsR. Our study provides significant new insight at the molecular level on the regulatory role of heme that modulates the complex transcriptional regulation in R. sphaeroides and supports the two levels of heme signaling, via its binding to AppA and PpsR and via the sensing of gases like oxygen.