IRF-1 and IRF-2 are two structurally related transcription factors originally identified as regulators of the type I interferon (IFN) system. IRF-1 functions as an activator whereas IRF-2 binds to the same cis-elements and can repress IRF-1 action. More recently these two factors have been shown to act in a mutually antagonistic manner to regulate cell growth; overexpression of the repressor IRF-2 leads to cell transformation, whereas concomitant overexpression of IRF-1 leads to reversion. Previous studies have identified DNA-binding domains in IRF-1 and IRF-2 and an activation domain in IRF-1. In the present study we show that IRF-2 also possesses a transcriptional repression domain in its carboxyl terminal region. We further observe that a LexA-IRF2 fusion can inhibit the function of an activator positioned nearby in the promoter. Thus, repression by IRF-2 may involve both competition with IRF-1 for binding to the promoter as well as the 'silencing' of nearby activators. Furthermore, we demonstrate the presence of a latent activation domain in the central region of IRF-2 and speculate that IRF-2 may contribute to gene activation under certain conditions.