Success in nature depends upon an ability to perceive and adapt to the surrounding environment. Bacteria are not an exception; they recognize and constantly adjust to changing situations by sensing environmental and self-produced signals, altering gene expression accordingly. Autoinducer-2 (AI-2) is a signal molecule produced by LuxS, an enzyme found in many bacterial species and thus proposed to enable interspecies communication. Two classes of AI-2 receptors and many layers and interactions involved in downstream signalling have been identified so far. Although AI-2 has been implicated in the regulation of numerous niche-specific behaviours across the bacterial kingdom, interpretation of these results is complicated by the dual role of LuxS in signalling and the activated methyl cycle, a crucial central metabolic pathway. In this article, we present a comprehensive review of the discovery and early characterization of AI-2, current developments in signal detection, transduction and regulation, and the major studies investigating the phenotypes regulated by this molecule. The development of novel tools should help to resolve many of the remaining questions in the field; we highlight how these advances might be exploited in AI-2 quorum quenching, treatment of diseases, and the manipulation of beneficial behaviours caused by polyspecies communities.