We have previously shown that the human cytomegalovirus early UL4 promoter has upstream negative and positive cis-acting regulatory elements. In the absence of the upstream negative regulatory region, the positive element confers strong transcriptional activity. The positive element contains a CCAAT box dyad symmetry and binds the cellular transcription factor NF-Y. The effect of the negative regulatory element is negated by the viral IE2 protein (L. Huang, C.L. Malone, and M.F. Stinski, J. Virol. 68:2108, 1994). We investigated the binding of cellular or viral IE2 protein to the negative regulatory region. The major cis-acting negative regulatory element was located between -168 and -134 bp relative to the transcription start site. This element could be transferred to a heterologous promoter, and it functioned in either orientation. Mutational analysis demonstrated that a core DNA sequence in the cis-acting negative regulatory element, 5'-GTTTGGAATCGTT-3', was required for the binding of either a cellular repressor protein(s) or the viral IE2 protein. The cellular DNA binding activity was present in both nonpermissive HeLa and permissive human fibroblast cells but more abundant in HeLa cells. Binding of the cellular repressor protein to the upstream cis-acting negative regulatory element correlates with repression of transcription from the early UL4 promoter. Binding of the viral IE2 protein correlates with negation of the repressive effect.