EBNA-3C can affect the LMP-1 promoter in both a positive and a negative manner through distinct DNA sequence elements, The viral transactivator EBNA-2 normally binds DNA indirectly via J kappa to activate transcription, but this activation is prevented in the presence of EBNA-3C. The DNA element recognized by J kappa is both required and sufficient for this inhibition, J kappa clones isolated in a yeast two-hybrid screen using EBNA-3C as bait allowed us to delineate the sequences of both proteins mediating the interaction. Two isoforms of J kappa that differ in exon 1, J kappa-1 and RBP-2N, interact with EBNA-3C, suggesting that exon 1 is not required for this interaction; indeed, clones with deletion of the N-terminal third of J kappa interacted as efficiently with EBNA-3C as full-length J kappa clones. A J kappa domain as small as 56 amino acids was sufficient to bind to EBNA-3C. A 74-amino-acid domain of EBNA-3C, conserved in all three EBNA-3 family members, was sufficient to interact with J kappa. A specific mutation in this conserved domain suppressed the ability of EBNA-3C to downregulate transcription, Accordingly, EBNA-3C was also able to interact with J kappa and downregulate J kappa-mediated transcription as efficiently as EBNA-3C. The ability of the EBNA-3 proteins to prevent J kappa from binding to DNA in vitro and suppress transactivation via J kappa DNA elements suggests that the EBNA-3 proteins act analogously to the Drosophila protein Hairless.