YggG is a conserved lipoprotein localized to the outer membrane of Gram negative bacteria. Even though the expressed open reading frame has been identified previously, the Escherichia coli protein remained uncharacterized. We report that YggG of E. coli is a metalloprotease that cleaves its targets preferentially between Phe–Phe residues. Since the yggG promoter is upregulated when bacteria are subjected to media of low osmolarity, YggG was named LoiP (low osmolarity induced protease). LoiP has an intramolecular disulfide (S–S) bond that is formed even in the absence of the periplasmic oxido-reductase DsbA and proper membrane localization of LoiP can depend on another putative metalloprotease, YfgC.