Response to the gaseous plant hormone ethylene in Arabidopsis requires the EIN3/EIL family of nuclear proteins. The biochemical function(s) of EIN3/EIL proteins, however, has remained unknown. In this study, we show that EIN3 and EILs comprise a family of novel sequence-specific DNA-binding proteins that regulate gene expression by binding directly to a primary ethylene response element (PERE) related to the tomato E4-element. Moreover, we identified an immediate target of EIN3, ETHYLENE-RESPONSE-FACTOR1 (ERF1), which contains this element in its promoter. EIN3 is necessary and sufficient for ERF1 expression, and, like EIN3-overexpression in transgenic plants, constitutive expression of ERF1 results in the activation of a variety of ethylene response genes and phenotypes. Evidence is also provided that ERF1 acts downstream of EIN3 and all other components of the ethylene signaling pathway. The results demonstrate that the nuclear proteins EIN3 and ERF1 act sequentially in a cascade of transcriptional regulation initiated by ethylene gas.