We have previously characterized a protein, enhancer 1 binding factor (E1BF), from rat cells that can modulate RNA polymerase I-directed transcription of the rat rRNA gene in vitro. E1BF, a heterodimeric DNA binding protein composed of 72-kDa and 85-kDa subunits, is related to the human Ku autoantigen with respect to immunological and certain structural properties. To establish the direct role of E1BF in transcription, we investigated the effect of anti-Ku antibodies on RNA polymerase I-directed transcription in rat and mouse cell extracts. These antibodies, one directed against the 70-kDa Ku subunit and the other against a peptide fragment of this subunit, dissociated the E1BF heterodimer into its two subunits. The DNA-protein complex formed in the presence of the antibodies contained only the 72-kDa subunit. Preincubation of the extracts with these antibodies resulted in an almost complete inhibition of transcription. The reduced transcription was observed when either linear or circular template was used. The inhibitory effect of the antibodies was greatest when added prior to preinitiation complex formation and was minimized significantly when added after establishment of the initiation complex. The repression of rRNA gene transcription was overcome by the addition of purified E1BF. This study demonstrates that E1BF, a Ku-related protein, is required for RNA polymerase I-directed transcription, the 72-kDa subunit is the major DNA binding polypeptide, the factor acts primarily in the formation of the preinitiation complex, and heterodimerization of its two subunits is crucial for maintaining the functional integrity of the protein.