Morphological changes leading to aerial mycelium formation and sporulation in the mycelial bacterium Streptomyces coelicolor rely on establishing distinct patterns of gene expression in separate regions of the colony. sH was identified previously as one of three paralogous sigma factors associated with stress responses in S. coelicolor. Here, we show that sigH and the upstream gene prsH (encoding a putative antisigma factor of sH) form an operon transcribed from two developmentally regulated promoters, sigHp1 and sigHp2. While sigHp1 activity is confined to the early phase of growth, transcription of sigHp2 is dramatically induced at the time of aerial hyphae formation. Localization of sigHp2 activity using a transcriptional fusion to the green fluorescent protein reporter gene (sigHp2–egfp) showed that sigHp2 transcription is spatially restricted to sporulating aerial hyphae in wild-type S. coelicolor. However, analysis of mutants unable to form aerial hyphae (bld mutants) showed that sigHp2 transcription and sH protein levels are dramatically upregulated in a bldD mutant, and that the sigHp2–egfp fusion was expressed ectopically in the substrate mycelium in the bldD background. Finally, a protein possessing sigHp2 promoter-binding activity was purified to homogeneity from crude mycelial extracts of S. coelicolor and shown to be BldD. The BldD binding site in the sigHp2 promoter was defined by DNase I footprinting. These data show that expression of sH is subject to temporal and spatial regulation during colony development, that this tissue-specific regulation is mediated directly by the developmental transcription factor BldD and suggest that stress and developmental programmes may be intimately connected in Streptomyces morphogenesis.