Gene looping juxtaposes the promoter and terminator regions of RNA polymerase II-transcribed genes in yeast and mammalian cells. Here we report an activator-dependent interaction of transcription initiation and termination factors during gene looping in budding yeast. Chromatin analysis revealed that MET16, INO1, and GAL1p-BUD3 are in a stable looped configuration during activated transcription. Looping was nearly abolished in the absence of transcription activators Met28, Ino2, and Gal4 of MET16, INO1, and GAL1p-BUD3 genes, respectively. The activator-independent increase in transcription was not accompanied by loop formation, thereby suggesting an essential role for activators in gene looping. The activators did not facilitate loop formation directly because they did not exhibit an interaction with the 3' end of the genes. Instead, activators physically interacted with the general transcription factor TFIIB when the genes were activated and in a looped configuration. TFIIB cross-linked to both the promoter and the terminator regions during the transcriptionally activated state of a gene. The presence of TFIIB on the terminator was dependent on the Rna15 component of CF1 3' end processing complex. Coimmunoprecipitation revealed a physical interaction of Rna15 with TFIIB. We propose that the activators facilitate gene looping through their interaction with TFIIB during transcriptional activation of genes.