The overexpression of the MDR1 gene, which encodes a multidrug efflux pump of the major facilitator superfamily, is a frequent cause of resistance to the widely used antimycotic agent fluconazole and other toxic compounds in the pathogenic yeast Candida albicans. The zinc cluster transcription factor Mrr1 controls MDR1 expression in response to inducing chemicals, and gain-of-function mutations in MRR1 are responsible for the constitutive MDR1 upregulation in fluconazole-resistant C. albicans strains. To understand how Mrr1 activity is regulated, we identified functional domains of this transcription factor. A hybrid protein consisting of the N-terminal 106 amino acids of Mrr1 and the transcriptional activation domain of Gal4 from Saccharomyces cerevisiae constitutively induced MDR1 expression, demonstrating that the DNA binding domain is sufficient to target Mrr1 to the MDR1 promoter. Using a series of C-terminal truncations and systematic internal deletions, we could show that Mrr1 contains multiple activation and inhibitory domains. One activation domain (AD1) is located in the C terminus of Mrr1. When fused to the tetracycline repressor TetR, this distal activation domain induced gene expression from a TetR-dependent promoter. The deletion of an inhibitory region (ID1) located near the distal activation domain resulted in constitutive activity of Mrr1. The additional removal of AD1 abolished the constitutive activity, but the truncated Mrr1 still could activate the MDR1 promoter in response to the inducer benomyl. These results demonstrate that the activity of Mrr1 is regulated in multiple ways and provide insights into the function of an important mediator of drug resistance in C. albicans.