THE zinc-finger protein Kruppel (Kr)(1) is an integral part of the Drosophila segmentation gene cascade(2) and is essential in organogenesis during later embryonic development(3). In tissue culture, Kr regulates transcription(4-9). Monomeric Kr can act as a transcriptional activator, whereas Kr dimers formed at high concentrations cause repression(6). Here we show that Kr-dependent control of transcription involves functional interactions with components of the basal RNA polymerase II transcription machinery, which includes the initiation factors TFIIA, B, E, F, H and I (refs 10, 11) as well as the TATA-binding protein (TBP) and TBP-associated factors (TAFs) contained in the multisubunit TFIID (ref. 12). Our results indicate that when acting from a site close to a basal promoter, monomeric Kr interacts with TFIIB to activate transcription, whereas an interaction of the Kr dimer with TFIIE beta w, a subunit of TFIIE, results in transcriptional repression.