Several members of the RecQ family of DNA helicases are known to interact with DNA topoisomerase III (Top3). Here we show that the Saccharomyces cerevisiae Sgs1 and Top3 proteins physically interact in cell extracts and bind directly in vitro. Sgs1 and Top3 proteins coimmunoprecipitate from cell extracts under stringent conditions, indicating that Sgs1 and Top3 are present in a stable complex. The domain of Sgs1 which interacts with Top3 was identified by expressing Sgs1 truncations in yeast. The results indicate that the NH(2)-terminal 158 amino acids of Sgs1 are sufficient for the high affinity interaction between Sgs1 and Top3. In vitro assays using purified Top3 and NH(2)-terminal Sgs1 fragments demonstrate that at least part of the interaction is through direct protein-protein interactions with these 158 amino acids. Consistent with these physical data, we find that mutant phenotypes caused by a point mutation or small deletions in the Sgs1 NH(2) terminus can be suppressed by Top3 overexpression. We conclude that Sgs1 and Top3 form a tight complex in vivo and that the first 158 amino acids of Sgs1 are necessary and sufficient for this interaction. Thus, a primary role of the Sgs1 amino terminus is to mediate the Top3 interaction.