Chemotaxis in Escherichia coli is one of the most thoroughly studied model systems for signal transduction. Receptor-kinase complexes, organized in clusters at the cell poles, sense chemoeffector stimuli and transmit signals to flagellar motors by phosphorylation of a diffusible response regulator protein. Despite the apparent simplicity of the signal transduction pathway, the high sensitivity, wide dynamic range and integration of multiple stimuli of this pathway remain unexplained. Recent advances in computer modeling and in quantitative experimental analysis suggest that cooperative protein interactions in receptor clusters play a crucial role in the signal processing during bacterial chemotaxis.