We have used the two-hybrid system to identify proteins that interact with the product of RAD7, a gene involved in DNA repair. A screen of a yeast genomic DNA-GAL4 activation domain (GAD) fusion gene library allowed the isolation of plasmids containing sequences corresponding to the 3' end of the SIR3 gene. This gene is known to be involved in the production of transcriptionally silent DNA at the cryptic mating-type cassettes and at telomeres. The cloned sequences coded for amino acids 307-979 of the Sir3 protein. A sir3 deletion allele, constructed in an isogenic rad7-deletion strain, rescued approximately one-quarter of the UV sensitivity associated with the rad7 deletion, indicating that the two genes interact genetically. Radiolabeled fusion proteins, made with the glutathione S-transferase (GST) gene in the vector pGEX-2T, were purified from Escherichia coli and shown to interact in vitro. This evidence suggests that the Sir3 protein interacts with the Rad7 protein to allow the nucleotide excision repair complex access to transcriptionally inactive chromatin. The proportions of 5-FOA-resistant cells in cultures from isogenic RAD+ and rad7-delta strains containing a telomeric URA3 gene were similar, suggesting that the RAD7 gene is not involved in the production or structure of transcriptionally silent chromatin at the telomeres. RAD7-dependent DNA repair of transcriptionally silent chromatin was shown not to induce expression of a telomeric copy of the URA3 gene, suggesting that repair of transcriptionally silent chromatin differs from transcriptionally active chromatin. Expression of a telomeric copy of the URA3 gene was stimulated in a rad7-delta mutant, suggesting that repair of lesions in the absence of Rad7 can result in the activation of transcriptionally silenced genes.