Drosophila transcription factor IIA (TFIIA) is composed of three subunits (30, 20, and 14 kD) that function during initiation of transcription. We reported previously the characterization of cDNAs that encode a precursor (dTFIIA-L) of the Drosophila TFIIA 30- and 20-kD subunits. In the absence of the smallest subunit, dTFIIA-S (14 kD), the unprocessed large subunit failed to exhibit any detectable promoter binding or transcriptional activity. Here, we report the molecular cloning and expression of dTFIIA-S, which has allowed the assembly of holo-dTFIIA (dTFIIA-L/S). Subunit interaction studies indicate that dTFIIA-S binds to an amino-terminal domain of dTFIIA-L, which likely corresponds to the endogenous 30-kD processed species. In addition, both dTFIIA-S and the carboxy-terminal domain of dTFIIA-L, which corresponds to the 20-kD species, independently interact weakly with the TATA-binding protein (TBP). In contrast, the holo-dTFIIA (L/S) binds TBP with high affinity. The dTFIIA-L/S complex also binds cooperatively with TBP to TATA box DNA sequences, generating an extended DNase footprint pattern. The reconstituted holo-dTFIIA is able to stimulate basal transcription of several core promoter templates. Interestingly, dTFIIA-L/S is also able to significantly enhance transcriptional activation by upstream transcription factors including Sp1, VP16, and NTF-1. These results suggest that dTFIIA is a multifunctional transcription factor capable of influencing DNA binding as well as interactions with the basal machinery, thereby enhancing activator-dependent transcription.