Clostridium thermocellum is a potential microbial platform to convert abundant plant biomass to biofuels and other renewable chemicals. It efficiently degrades lignocellulosic biomass using a surface displayed cellulosome, a megadalton sized multienzyme containing complex. The enzymatic composition and architecture of the cellulosome is controlled by several transmembrane biomass‐sensing RsgI‐type anti‐σ factors. Recent studies suggest that these factors transduce signals from the cell surface via a conserved RsgI extracellular (CRE) domain (also called a periplasmic domain) that undergoes autoproteolysis through an incompletely understood mechanism. Here we report the structure of the autoproteolyzed CRE domain from the C. thermocellum RsgI9 anti‐σ factor, revealing that the cleaved fragments forming this domain associate to form a stable α/β/α sandwich fold. Based on AlphaFold2 modeling, molecular dynamics simulations, and tandem mass spectrometry, we propose that a conserved Asn‐Pro bond in RsgI9 autoproteolyzes via a succinimide intermediate whose formation is promoted by a conserved hydrogen bond network holding the scissile peptide bond in a strained conformation. As other RsgI anti‐σ factors share sequence homology to RsgI9, they likely autoproteolyze through a similar mechanism.