EBNA-3C can affect the LMP-1 promoter in both a positive and a negative manner through distinct DNA sequence elements. The viral transactivator EBNA-2 normally binds DNA indirectly via Jkappa to activate transcription, but this activation is prevented in the presence of EBNA-3C. The DNA element recognized by Jkappa is both required and sufficient for this inhibition. Jkappa clones isolated in a yeast two-hybrid screen using EBNA-3C as bait allowed us to delineate the sequences of both proteins mediating the interaction. Two isoforms of Jkappa that differ in exon 1, Jkappa-1 and RBP-2N, interact with EBNA-3C, suggesting that exon 1 is not required for this interaction; indeed, clones with deletion of the N-terminal third of Jkappa interacted as efficiently with EBNA-3C as full-length Jkappa clones. A Jkappa domain as small as 56 amino acids was sufficient to bind to EBNA-3C. A 74-amino-acid domain of EBNA-3C, conserved in all three EBNA-3 family members, was sufficient to interact with Jkappa. A specific mutation in this conserved domain suppressed the ability of EBNA-3C to downregulate transcription. Accordingly, EBNA-3A was also able to interact with Jkappa and downregulate Jkappa-mediated transcription as efficiently as EBNA-3C. The ability of the EBNA-3 proteins to prevent Jkappa from binding to DNA in vitro and suppress transactivation via Jkappa DNA elements suggests that the EBNA-3 proteins act analogously to the Drosophila protein Hairless.