Hypertonicity-induced binding of the transcription factor TonEBP/OREBP to its cognate DNA element, ORE/TonE, is associated with increased transcription of several osmotically regulated genes. Previously, it was found that hypertonicity rapidly causes nuclear translocation and phosphorylation of TonEBP/OREBP and, more slowly, increases TonEBP/OREBP abundance. Also, the C terminus of TonEBP/OREBP was found to contain a transactivation domain (TAD). We have now tested for tonicity dependence of the TAD activity of the 983 C-terminal amino acids of TonEBP/OREBP. HepG2 cells were cotransfected with a reporter construct and one of several TAD expression vector constructs. The reporter construct contained GAL4 DNA binding elements, a minimal promoter, and the Photinus luciferase gene. TAD expression vectors generate chimeras comprised of the GAL4 DNA binding domain fused to (i) the 983 C-terminal amino acids of TonEBP/OREBP, (ii) 17 glutamine residues, (iii) the TAD of c-Jun, or (iv) no TAD. All TAD-containing chimeras were functional at normal extracellular osmolality (300 mosmol/kg), but the activity only of the chimera containing the 983 C-terminal amino acids of TonEBP/OREBP varied with extracellular NaCl concentration, decreasing by >80% at 200 mosmol/kg and increasing 8-fold at 500 mosmol/kg. The chimera containing the 983 C-terminal amino acids of TonEBP/OREBP was constitutively localized to the nucleus and showed tonicity-dependent posttranslational modification consistent with phosphorylation. The activity at 500 mosmol/kg was reduced by herbimycin, a tyrosine kinase inhibitor and by 5,6-dichloro-1-beta-D-ribofuranosylbenzimidazole, a protein kinase CK2 inhibitor. Thus, the 983 C-terminal amino acids of TonEBP/OREBP contain a TAD that is regulated osmotically, apparently by tonicity-dependent phosphorylation.