Cell differentiation is ubiquitous and facilitates division of labour and development. Bacteria are capable of "multicellular" behaviours that benefit the bacterial community as a whole. A striking example of bacterial differentiation occurs throughout the formation of a biofilm. During Bacillus subtilis biofilm formation a subpopulation of cells differentiate into a specialised population that synthesises the exopolysaccharide and the TasA amyloid components of the extracellular matrix. The differentiation process is indirectly controlled by the transcription factor Spo0A that facilitates transcription of the eps and tapA (tasA) operons. DegU is a transcription factor involved in regulating biofilm formation. Here, using a combination of genetics and live single cell cytological techniques, we define the mechanism of biofilm inhibition at high levels of DegU phosphate (DegU~P) by showing that transcription from the eps and tapA promoter regions is inhibited. Data are presented demonstrating that this is not a direct regulatory event. We demonstrate that DegU~P controls the frequency of cells activating transcription from the operons needed for matrix biosynthesis in favour of an OFF state. Subsequent experimental analysis led us to conclude that DegU~P functions to increase the level of Spo0A~P, driving cell fate differentiation towards the terminal developmental process of sporulation.