NGFI-A is an immediate-early gene that encodes a transcription factor whose DNA-binding domain is composed of three zinc fingers. To define the domains responsible for its transcriptional activity, a mutational analysis was conducted with an NGFI-A molecule in which the zinc fingers were replaced by the GAL4 DNA-binding domain. In a cotransfection assay, four activation domains were found within NGFI-A. Three of the activation domains are similar to those characterized previously: one contains a large number of acidic residues, another is enriched in proline and glutamine residues, and another has some sequence homology to a domain found in Krox-20. The fourth bears no resemblance to previously described activation domains. NGFI-A also contains an inhibitory domain whose removal resulted in a 15-fold increase in NGFI-A activity. This increase in activity occurred in all mammalian cell types tested but not in Drosophila S2 cells. Competition experiments in which increasing amounts of the inhibitory domain were cotransfected along with NGFI-A demonstrated a dose-dependent increase in NGFI-A activity. A point mutation within the inhibitory domain of the competitor (I293F) abolished this property. When the analogous mutation was introduced into native NGFI- A, a 17-fold increase in activity was observed. The inhibitory effect therefore appears to be the result of an interaction between this domain and a titratable cellular factor which is weakened by this mutation. Downmodulation of transcription factor activity through interaction with a cellular factor has been observed in several other systems, including the regulation of transcription factor E2F by retinoblastoma protein, and in studies of c-Jun.