NRE1 is a DNA sequence element through which Ku antigen/DNA-dependent protein kinase (DNA-PK) catalytic subunit represses the induction of mouse mammary tumor virus transcription by glucocorticoids. Although Ku is an avid binder of DNA ends and has the ability to translocate along DNA, we report that direct sequence-specific Ku binding occurs with higher affinity (Kd = 0.84 +/- 0.24 nM) than DNA end binding. Comparison of Ku binding to several sequences over which Ku can accumulate revealed two classes of sequence. Sequences with similarity to NRE1 competed efficiently for NRE1 binding. Conversely, sequences lacking similarity to NRE1 competed poorly for Ku and were not recognized in the absence of DNA ends. Phosphorylation of glucocorticoid receptor (GR) fusion proteins by DNA-PK reflected Ku DNA-binding preferences and demonstrated that co-localization of GR with DNA-PK on DNA in cis was critical for efficient phosphorylation. Phosphorylation of the GR fusion protein by DNA-PK mapped to a single site, Ser-527. This site occurs adjacent the GR nuclear localization sequence between the DNA and ligand binding domains of GR, and thus its phosphorylation, if confirmed, has the potential to affect receptor function in vivo.