Yeast GCN4 protein binds specifically to the promoters of amino acid biosynthetic genes and coordinately induces their transcription. Serially deleted GCN4 and hybrid LexA-GCN4 proteins were assayed for specific DNA binding activity in vitro, and for stimulation of transcription in vivo. The specific DNA binding activity resides in the 60 C-terminal amino acids, a basic region of GCN4. However, certain deletions containing the entire DNA binding region are unable to activate transcription and instead act as repressors in vivo. The activation function appears to critically involve just 19 amino acids that are centrally located in an acidic region of GCN4. In addition to their functional separation, the DNA binding and transcriptional activation regions of the protein can be separated physically by elastase cleavage. The implications of these results for the mechanisms of DNA sequence recognition and transcription activation are discussed.