Trax (Translin-associated factor X) has been shown to interact with TB-RBP/Translin by its coimmunoprecipitation and in yeast two-hybrid assays. Here we demonstrate that Trax is widely expressed, does not bind to DNA or RNA, but forms heterodimers with TB-RBP under reducing conditions. The heterodimer of TB-RBP and Trax inhibits TB-RBP binding to RNA, but enhances TB-RBP binding to specific single stranded DNA sequences. The in vitro interactions between TB-RBP and Trax are confirmed by similar interactions in the yeast two-hybrid system. Cell fractionation and confocal microscope studies reveal that Trax is predominantly cytoplasmic. In contrast, TB-RBP is present in both the nuclei and cytoplasm of transfected cells and uses a highly conserved nuclear export signal to exit nuclei. In addition to a leucine zipper, two basic domains in TB-RBP are essential for RNA binding, but only one of these domains is needed for DNA binding. Trax restores DNA binding to TB-RBP containing an altered form of this domain. These data suggest that Trax-TB.RBP interactions modulate the DNA- and RNA-binding activity of TB-RBP.