Sp1, Sp3 (SPR-2) and Sp4 (SPR-1) are human sequence-specific DNA binding proteins with very similar structural features. In this report, we have analyzed Sp3 in direct comparison with Sp1. We have raised antibodies against both Sp1 and Sp3, and show that Sp3 protein, like Sp1, is expressed in various cell lines. Co-transfection experiments in different mammalian cell lines reveal that in contrast to Sp1 and Sp4, Sp3 is not able to activate several Sp1 responsive promoters. In addition, Sp3 also fails to activate reporter constructs in Drosophila SL2 cells lacking endogenous Sp factors. Instead, we find that Sp3 represses Sp1-mediated activation in a linear dose-dependent manner. A mutant of Sp3 lacking the DNA binding domain does not affect activation by Sp1, suggesting that the inhibition is most likely due to the competition with Sp1 for their common binding sites. To determine if any structurally similar domain of Sp3 is able to replace partially homologous domains of Sp1, we have generated chimeric proteins and tested their activation characteristics in gene transfer experiments. It appears that neither the glutamine-rich domains A and B nor the D domain of Sp1 can be replaced by the homologous regions of Sp3. Our results suggest that Sp3 is an inhibitory member of the Sp family.