Using a genetic strategy designed to find proteins involved in the function of the Saccharomyces cerevisiae transcriptional activator GAL4, we isolated mutants in two genes which rescue a class of gal4 activation domain mutants. One of these genes, SUG1, encodes a member of a large family of putative ATPases, the Conserved ATPase containing Domain (CAD) proteins (also known as AAA proteins) that are involved in a wide variety of cellular functions. Subsequently, SUG1 was identified as a subunit of the 26 S proteasome. We have now cloned the gene defined by the second complementation group. SUG2 encodes an essential 49-kDa protein that is also a member of the CAD family and is 43% identical to SUG1. The mutation in sug2-1, like that in sug1-1, is found in the CAD near the highly conserved ATPase motif. We present biochemical and genetic evidence that SUG2 is associated in vivo with SUG1 and is a novel CAD protein subunit of the 26 S proteasome. With its highly conserved mammalian homologs, human p42 and ground squirrel CADp44, SUG2 defines a new class of proteasomal CAD proteins.The GAL4 protein of Saccharomyces cerevisiae is responsible for a very large stimulation (ϳ1000-fold) in the transcription of genes required for galactose metabolism under inducing conditions. The N-terminal 97 amino acids of GAL4 encode the DNA binding domain, while activation function and interaction with the negative regulator GAL80 map to 34 amino acids near the C terminus (1). Partial deletion of this activation domain in the gal4D and gal4-62 alleles leads to a defect in activation by GAL4 and an inability to grow on galactose as the sole carbon source (2, 3). A frameshift mutation of gal4-62 that changes the C-terminal amino acids of the truncated protein from FGITT to FMNV restores the ability to grow on galactose. While the truncated gal4D activation domain retains only 3% of wild type activity, the frameshift mutation restores activity to 40% (4, 5). We reasoned that if a small change in the truncated activation domain could restore function, we might genetically identify proteins contacted by GAL4 in the activation process by selecting extragenic suppressors of gal4D.This strategy yielded mutants in two complementation groups (2).1 One of these, sug1, had been isolated independently by Matsumoto et al. (3) as a suppressor for galactose (sug) of the gal4-62 allele and was presumed to be an information suppressor. However, sug1-1 suppresses gal4D, which terminates at the same amino acid as the gal4-62 allele with a frameshift and multiple stop codons, arguing that sug1-1 does not act as an information suppressor.We have previously characterized the sug1-1 allele. It is able to suppress a variety of mutations in the activation domain of GAL4, short of its complete deletion, but is unable to suppress mutations in other regions of the protein. The SUG1 gene was cloned and sequenced and was one of the first identified