The transcriptional regulators Pho4p and Pho2p are involved in transcription of several genes in the PHO regulon of Saccharomyces cerevisiae. Genetic evidence with temperature-sensitive pho4 and pho2 mutants suggested that Pho4p and Pho2p interact with each other. Immunoprecipitation experiments showed that Pho4p and Pho2p form a complex on a 36-bp sequence bearing an upstream activation site (UAS) and protein binding assays indicated that these proteins interact directly. DNA-binding experiments with crude extracts prepared from yeast strains expressing T7-PHO4, encoding Pho4p tagged with the T7 epitope, indicated that Pho2p interacts with T7-Pho4p and enhances the binding affinity of T7-Pho4p to the UAS. Protein binding experiments also showed that both Pho4p and Pho2p could bind with the general transcription factors, TBP, TFIIB, and TFIIEbeta, suggesting that the Pho4p-Pho2p complex bound to the UAS activates transcription of the PHO genes by direct interaction with the general transcription factors.