A member of the polyomavirus enhancer binding protein 2/core binding factor (PEBP2/CBF) is composed of PEBP2␣B1/AML1 (as the ␣ subunit) and a  subunit. It plays an essential role in definitive hematopoiesis and is frequently involved in the chromosomal abnormalities associated with leukemia. In the present study, we report functionally separable modular structures in PEBP2␣B1 for DNA binding and for transcriptional activation. DNA binding through the Runt domain of PEBP2␣B1 was hindered by the adjacent carboxyterminal region, and this inhibition was relieved by interaction with the  subunit. Utilizing a reporter assay system in which both the ␣ and  subunits are required to achieve strong transactivation, we uncovered the presence of transcriptional activation and inhibitory domains in PEBP2␣B1 that were only apparent in the presence of the  subunit. The inhibitory domain keeps the full transactivation potential of full-length PEBP2␣B1 below its maximum potential. Fusion of the transactivation domain of PEBP2␣B1 to the yeast GAL4 DNA-binding domain conferred transactivation potential, but further addition of the inhibitory domain diminished the activity. These results suggest that the activity of the ␣ subunit as a transcriptional activator is regulated intramolecularly as well as by the  subunit. PEBP2␣B1 and the  subunit were targeted to the nuclear matrix via signals distinct from the nuclear localization signal. Moreover, the transactivation domain by itself was capable of associating with the nuclear matrix, which implies the existence of a relationship between transactivation and nuclear matrix attachment.The polyomavirus enhancer binding protein 2 (PEBP2), also called core binding factor (CBF), is a transcription factor complex composed of ␣ and  subunits (reviewed in references 21 and 51). The ␣ subunit binds to DNA and harbors the transactivating activity, while the  subunit enhances the DNA binding activity of the ␣ subunit. In mammals, members of the ␣ subunit family are encoded by three genes, PEBP2␣A/ CBFA1/AML3, PEBP2␣B/CBFA2/AML1, and PEBP2␣C/ CBFA3/AML2, and all belong to the Runt domain gene family, which includes the Drosophila genes runt and lozenge. The  subunit is encoded by a single gene, PEBP2/CBFB, whereas two genes, brother and big brother have been identified in Drosophila.Among the three mammalian ␣ subunit genes, PEBP2␣B/ CBFA2/AML1 (2, 36, 51) is disrupted in chromosomal translocations associated with several types of leukemia, including the M2 subtype of the French-American-British classification of leukemia, which is characterized by the 8-to-21 chromosome translocation [t(8;21)], and childhood acute lymphoblastic leukemia with the associated t(12;21) translocation. The t(8;21) and t(12;21) translocations produce the chimeric proteins, AML1/ETO(MTG8) and TEL-AML1, respectively (13,19,37). These proteins retain the entire Runt domain in their PEBP2␣B/AML1 portions, which is essential and sufficient for dimerization with the  subunit and for DNA binding. In addition, it is...