Carbon catabolite repression in Aspergillus nidulans is mediated by a negative-acting protein coded by the creA gene. We have investigated how CREA controls the expression of the ethanol regulon genes. CREA is a major component of the control of this regulon. Its presence in the cell results in a permanent, albeit partial, repression of the alc genes under all physiological growth conditions, even when the fungus is grown on carbon sources considered to be non-repressing. A crucial step in the control processes is the repression of the positive-acting specific regulatory gene alcR, by the binding of CREA on its cognate target sites on the alcR promoter. The removal of one of these targets, URSA, results in a 50% derepression of the alcR gene. Furthermore, the presence of this sequence contributes directly to the low alcR expression under nonrepressing conditions and reduces alcR promoter function by at least 100-fold. CREA acts both on the regulatory gene alcR and directly on the two structural genes alcA and aldA, as glucose repression of the latter genes occurs in strains where alcR transcription is driven by a strong constitutive and derepressed promoter. In vivo and in vitro competition experiments show that CREA acts by competing directly with the binding of the ALCR activator for the same region of the alcR promoter, a region which encompasses overlapping targets for both regulatory proteins. These data are consistent with a model in which the activating and repressing regulatory proteins compete to regulate expression of the ethanol regulon genes.