Transcription of the proviral DNA of mouse mammary tumor virus (MMTV) is induced by several classes of hormone-activated steroid receptor proteins. Basal promoter activity in the absence of receptor-mediated activation is selectively repressed by a distal negative regulatory element (dNRE) centered approximately 400 bp upstream of the transcription initiation site. An in vitro transcription system based on synthetic T-free cassette templates was developed to assess MMTV promoter activity, and dNRE-mediated repression was partially reconstituted with this system. Repression was observed with templates in which the dNRE was present in several sequence contexts. The activity of transcription preinitiation complexes formed in vitro in the presence of the dNRE could not be distinguished from that of complexes formed in its absence as assessed by the kinetics of transcript accumulation after addition of nucleoside triphosphates to preformed preinitiation complexes. dNRE-mediated repression in vitro appeared to be the result of decreased efficiency of assembly of functional transcription complexes on the MMTV promoter. However, repression could not be explained by inhibition of assembly of TATA-binding protein or transcription factor HE into transcription complexes, as neither protein decreased the extent of repression when supplied in excess as a purified recombinant protein.