Regulatory protein p4 from Bacillus subtilis phage phi 29 activates transcription from the viral late promoter, PA3, by stabilizing the binding of RNA polymerase to the DNA as a closed complex. Protein p4-induced DNA bending and direct contacts between p4 and RNA polymerase have been proposed to play a role in P(A3) activation. By site-directed mutagenesis at the carboxyl end of protein p4 we have identified residues that are critical both to interact with RNA polymerase and to activate transcription. Substitution of arginine 120 gives rise to a p4 derivative unable to activate transcription, that can bind to DNA and induce a normal DNA bending, but does not stimulate the binding of RNA polymerase to the promoter and cannot form complexes with RNA polymerase. Modification of the closely located residue leucine 117 had a similar but milder effect. The results obtained suggest that arginine 120 and leucine 117 form part of the activating domain of the protein, and show that direct contacts between protein p4 and RNA polymerase play a critical role in transcription activation. The p4-induced DNA bending is therefore necessary but not sufficient for the activation of the PA3 promoter.