The Interferon Regulatory Factors-1 and -2 (IRF-1 and IRF-2) play a transcriptional role in the regulation of the IFN-beta gene as well as other immunoregulatory genes. IRF-1 serves as a transcriptional activator whereas IRF-2 acts as an antagonistic transcriptional repressor. IRF-1 and IRF-2 also play opposing functional roles in cell growth regulation, and are implicated as a potential antioncogene and oncogene, respectively. To analyse the relationship between DNA binding/transcriptional repression and oncogenic transformation, NIH3T3 cells expressing C-terminal deletions of IRF-2 were established and assayed for transformation by saturation density analysis, anchorage independent growth in soft agar and tumor formation in nude mice. Cells expressing an IRF-2 protein of at least 160 N-terminal amino acids were transformed in vitro and tumorigenic in vivo, thus mapping IRF-2 oncogenic activity to its DNA binding/transcriptional repression domain. Overexpression of wild-type and truncated IRF-2 proteins resulted in reduced IFN-beta mRNA levels following induction by dsRNA. However, there was no effect of IRF-2 on IFN-beta inducibility by Sendai virus infection, suggesting the involvement of multiple IFN-beta induction pathways. In DNA binding assays, recombinant IRF-2 was found to preferentially bind to the IFN-beta PRDI site compared to IRF-1. These studies indicate that the transformed phenotype resulting from overexpression of IRF-2 may be due to constitutive engagement of the IRF-E recognition site, thus preventing DNA binding and transactivation of putative tumor suppressor genes by the IRF-1 anti-oncogene.