ERCC3 was initially identified as a gene correcting the nucleotide excision repair (NER) defect of xeroderma pigmentosum complementation group B (XP-B). The recent finding that its gene product is identical to the p89 subunit of basal transcription factor BTF2(TFIIH), opened the possibility that it is not directly involved in NER but that it regulates the transcription of one or more NER genes. Using an in vivo microinjection repair assay and an in vitro NER system based on cell-free extracts we demonstrate that ERCC3 in BTF2 is directly implicated in excision repair. Antibody depletion experiments support the idea that the p62 BTF2 subunit and perhaps the entire transcription factor function in NER. Microinjection experiments suggest that exogenous ERCC3 can exchange with ERCC3 subunits in the complex. Expression of a dominant negative K436-->R ERCC3 mutant, expected to have lost all helicase activity, completely abrogates NER and transcription and concomitantly induces a dramatic chromatin collapse. These findings establish the role of ERCC3 and probably the entire BTF2 complex in transcription in vivo which was hitherto only demonstrated in vitro. The results strongly suggest that transcription itself is a critical component for maintenance of chromatin structure. The remarkable dual role of ERCC3 in NER and transcription provides a clue in understanding the complex clinical features of some inherited repair syndromes.