**Step-by-Step Solution:**
1. **Understanding Gene Expression**: Gene expression is the process by which information from a gene is used to synthesize a functional gene product, usually a protein. In prokaryotes, this process can be regulated at different levels.
2. **Levels of Regulation**: In eukaryotes, gene expression can be regulated at multiple levels: transcription, processing, transport, and translation. However, in prokaryotes, the primary level of regulation is at the transcriptional level.
3. **Transcriptional Regulation in Prokaryotes**: In prokaryotes, the regulation of gene expression predominantly occurs at the initiation of transcription. This means that the control of when and how much RNA is synthesized from DNA is crucial.
4. **Role of RNA Polymerase**: The activity of RNA polymerase, which is the enzyme responsible for synthesizing RNA from the DNA template, is regulated by various accessory proteins. These proteins help RNA polymerase recognize the start sites of transcription.
5. **Promoter and Operator Regions**: In prokaryotic DNA, the promoter region is where RNA polymerase binds to initiate transcription. Adjacent to the promoter is the operator region, which can be bound by regulatory proteins (repressors or activators) that influence transcription.
6. **Repressors and Inducers**: Repressor proteins can bind to the operator region to block RNA polymerase from transcribing the gene, which is an example of negative regulation. Conversely, in the presence of an inducer, the repressor can be inactivated, allowing transcription to proceed, which is an example of positive regulation.
7. **Conclusion**: Therefore, in prokaryotes, the regulation of gene expression primarily occurs at the transcriptional level, specifically at the initiation of transcription.
**Final Answer**: In prokaryotes, regulation of gene expression occurs at the transcriptional level.
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