The regions of transcriptional enhancer factor-1 (TEF-1) required for its activation function and sequence-specific DNA binding have been determined. Deletion analysis of a chimera between TEF-1 and the GAL4 DNA binding domain (DBD) indicated that at least three regions of TEF-1 were involved in transactivation. However, none of these regions functioned as independent activating domains. Moreover, none of the GAL4 chimeras containing individual TEF-1 regions interfered with the activity of endogenous HeLa cell TEF-1, while interference was observed with the GAL4-TEF-1 chimeras which functioned as transactivators. These results indicate that there is a general correlation between the abilities of a given GAL4-TEF-1 chimera to function in transcriptional activation and interference, thus supporting the idea that transactivation by TEF-1 is mediated by a limiting transcriptional intermediary factor. In addition, we show experimentally that the TEA/ATTS domain is a novel class of DBD involved in the sequence-specific DNA binding of TEF-1 and its Drosophila homologue scalloped. Two other regions of TEF-1 are also required for DNA binding. These regions are not part of the minimum DBD, but may function by antagonizing the effect of sequences which negatively regulate DNA binding mediated by both the TEF-1 TEA/ATTS domain and the GAL4 DBD. In addition, analysis of TEF-1 and scalloped derivatives in which their TEA/ATTS domains have been interchanged further indicates that the TEA/ATTS domain is not the only determinant of DNA binding specificity.