We have analyzed the proximal promoter of the Drosophila Krüppel (Kr) gene. A 44-base pair fragment containing the RNA start sites contains significant promoter activity, and this minimal promoter is flanked both upstream and downstream by binding sites for the GAGA factor. The GAGA factor is the predominant sequence-specific DNA binding factor that interacts with the Kr promoter region, and the purified protein activates Kr transcription in vitro. However, strong transcriptional activation of Kr as well as of Ultrabithorax, another GAGA factor-responsive gene, requires the presence of a DNA binding transcriptional repressor. The GAGA factor is able to relieve this repression in a binding site-dependent manner, and, thus, these data suggest that the GAGA factor functions as an antirepressor, rather than an activator, of the Kr gene.