The transcription program of the hepatitis B virus (HBV) genome is regulated by an enhancer element that binds multiple ubiquitous and liver-enriched transcription activators. HBV transcription and replication are repressed in the presence of p53. Here we describe a novel molecular mechanism that is responsible for this repression. The p53 protein binds to a defined region within the HBV enhancer in a sequence-specific manner, and this, surprisingly, results in p53-dependent transcriptional repression in the context of the whole HBV enhancer. This unusual behavior of the HBV enhancer can be reconstituted by replacing its p53-binding region with the p53-binding domain of the mdm2 promoter. Remarkably, mutation of the EP element of the enhancer reversed the effect of p53 from repression to transcriptional stimulation. Furthermore, EP-dependent modulation of p53 activity can be demonstrated in the context of the mdm2 promoter, suggesting that EP is not only required but is also sufficient to convert p53 activity from positive to negative. Our results imply that the transcriptional effect of DNA-bound p53 can be dramatically modulated by the DNA context and by adjacent DNA-protein interactions.