Embryonal carcinoma (EC) cells are unable to make interferon in response to inducing agents. This block disappears after differentiation. We have found that nuclear extracts from undifferentiated P19 EC cells contain a DNA-binding activity which specifically recognizes a region within the human interferon-beta 1 promoter. This activity is absent from differentiated cell types, both of EC and non-EC origin. The binding of the factor in undifferentiated EC cells leads to dramatic changes in the overall protein binding pattern of the interferon promoter as compared with differentiated cells, and may be responsible for repression of the endogenous interferon-beta gene prior to differentiation.