In Pseudomonas putida KT2440, two pyrroloquinoline quinone-dependent ethanol dehydrogenases (PQQ-EDHs) are responsible for the periplasmic oxidation of a broad variety of volatile organic compounds (VOCs). Depending on the availability of rare earth elements (REEs) of the lanthanide series (Ln3+), we have recently reported that the transcription of the genes encoding the Ca2+-utilizing enzyme PedE and the Ln3+-utilizing enzyme PedH are inversely regulated. With adaptive evolution experiments, site-specific mutations, transcriptional reporter fusions, and complementation approaches, we now demonstrate that the PedS2/PedR2 (PP_2671/PP_2672) two-component system (TCS) plays a central role in the observed REE-mediated switch of PQQ-EDHs in P. putida. We provide evidence that in the absence of lanthanum (La3+), the sensor histidine kinase PedS2 phosphorylates its cognate LuxR-type response regulator PedR2, which in turn not only activates pedE gene transcription but is also involved in repression of pedH. Our data further suggest that the presence of La3+ lowers kinase activity of PedS2, either by the direct binding of the metal ions to the periplasmic region of PedS2 or by an uncharacterized indirect interaction, leading to reduced levels of phosphorylated PedR2. Consequently, the decreasing pedE expression and concomitant alleviation of pedH repression causes—in conjunction with the transcriptional activation of the pedH gene by a yet unknown regulatory module—the Ln3+-dependent transition from PedE- to PedH-catalyzed oxidation of alcoholic VOCs.