The mechanism by which inclusion bodies form is still not well understood, partly because the dynamic processes of the inclusion body formation and its solubilization have hardly been investigated at an individual cell level, and so the important detailed information has not been acquired for the mechanism. In this study, we investigated the in vivo folding and aggregation of Aspergillus phoenicis β-D-galactosidase fused to a red fluorescence protein in individual Escherichia coli cells. The folding status and expression level of the recombinant β-D-galactosidase at an individual cell level was analyzed by flow cytometry in combination with transmission electron microscopy and Western blotting. We found that individual E. coli cells fell into two distinct states, one containing only inclusion bodies accompanied with low galactosidase activity and the other containing the recombinant soluble galactosidase accompanied with high galactosidase activity. The majority of the E. coli cells in the later state possessed no inclusion bodies. The two states of the cells were shifted to a cell state with high enzyme activity by culturing the cells in isopropyl 1-thio-β-D-galactopyranoside-free medium after an initial protein expression induction in isopropyl 1-thio-β-D-galactopyranoside-containing medium. This shift of the cell population status took place without the level change of the β-D-galactosidase protein in individual cells, indicating that the factor(s) besides the crowdedness of the recombinant protein play a major role in the cell state transition. These results shed new light on the mechanism of inclusion body formation and will facilitate the development of new strategies in improving recombinant protein quality.