Jun and Fos proteins are DNA-binding proteins that are involved in the control of gene expression through transcriptional regulation. We have made a deletion mutant of the c-jun gene that lacks amino acids 3-122 of c-jun, and thus is missing the major transactivation domain of c-jun, but retains the DNA-binding and leucine zipper domains. Unlike c-Jun, the mutant protein is unable to stimulate the transcription of an AP-1 responsive gene, and unlike c-jun this mutant gene is unable to transform rat embryo cells in cooperation with an activated ras gene. However, this mutant protein blocks in vitro DNA binding of Jun-Jun homodimers and Jun-Fos heterodimers, transcriptional activation induced by c-jun or c-fos and transformation of rat embryo cells induced by an activated ras gene and a deregulated c-jun or c-fos gene. In addition, transformation of rat embryo cells induced by an activated ras gene in the presence of the tumor promoter 12-O-tetradecanoyl phorbol 13-acetate (TPA) or by ras plus SV40 large T antigen is also inhibited by this dominant-negative mutant, suggesting that a member of the jun or fos family is involved in the pathways leading to transformation in these systems as well. The possible molecular mechanisms by which this dominant-negative mutant of c-jun blocks the functions of wild-type jun and fos family members are discussed.