We have isolated mutants of Saccharomyces cerevisiae with an increased sensitivity to oxidative stress. All pos9 mutants (pos for peroxide sensitivity) were hypersensitive to methylviologene, hyperbaric oxygen or hydrogen peroxide, but grew similarly to the wild-type under all other conditions tested. Isolation and sequencing of the respective POS9 gene revealed that it was identical to SKN7. The predicted Skn7/Pos9 protein possesses a domain with high homology to prokaryotic response regulators. These regulatory proteins are part of a simple signalling cascade termed a "two-component system", where a phosphorylation signal of a histidine kinase is transferred to a conserved aspartate residue of the response regulator. To test the functional role of the respective aspartate residue of Skn7/Pos9 protein in oxidative stress, we mutagenized this residue in vitro to alanine, arginine and glutamate. Only the glutamate allele (D427 to E) was able to rescue the hydrogen peroxide-sensitivity of pos9 mutants. By fusion experiments with the Gal4 DNA-binding domain we identified the isolated response regulator-like domain as a novel eukaryotic domain sufficient for gene activation. Whereas this hybrid protein activated transcription of a lacZ reporter gene under aerobic conditions, no activation was observed under anaerobic conditions, indicating that the response regulator domain is involved in a signalling reaction. Two-hybrid investigations also suggest an oligomerization of the Pos9 protein. Our results indicate that a two-component system is involved in the oxidative-stress response of yeast.