A 40 amino acid region of Oct-2 from amino acids 142 to 181 functions as an active repressor domain capable of inhibiting both basal activity and activation of promoters containing a TATA box, but not of those that contain an initiator element. Based on our observation that the equivalent region of the closely related Oct-1 factor does not act as an inhibitory domain, we have mutated specific residues in the Oct-2 domain in an attempt to probe their importance in repressor domain function. Although mutations of several residues have no or minimal effect, mutation of proline 175 to arginine abolishes the ability to inhibit both basal and activated transcription. In contrast, mutation of proline 174 to arginine confers upon the domain the ability to repress activation of an initiator-containing promoter by acidic activation domains, and also suppresses the effect of the proline 175 mutation. Hence, adjacent proline residues play key roles in the functioning of the inhibitory domain and in limiting its specificity to TATA-box-containing promoters.