Epstein-Barr virus (EBV) is associated with the development of several types of human cancers and is an important cause of lymphomas in immunocompromised hosts. Expression of the EBV BZLF1 immediate-early gene product (Z) triggers disruption of latency in EBV-infected cells. Z is a member of the b-Zip family of proteins and binds to AP-1-like sites in early viral promoters. Here we show that a viral RNA related to Z, in which there is replacement of the transactivation domain of Z by fusion through alternate splicing with a portion of another EBV transactivator, BRLF1 (R), can repress Z function. This differentially spliced mRNA is predicted to express a novel chimeric protein which we call RAZ for R and Z. RAZ retains the dimerization and DNA-binding domains of Z but loses its transactivation domain. We show that in vitro the RAZ protein acts transdominantly to repress transactivation of early promoters by Z. Repression is produced by dimerization of RAZ with Z resulting in RAZ:Z heterodimers that can no longer bind to Z-binding sites despite retention of the DNA-binding domains in both proteins. Deletion of the R domain of RAZ restores the ability of the truncated RAZ homodimers and RAZ:Z heterodimers to bind to DNA. A biologic effect of RAZ was shown by cotransfection of latently infected Raji cells with Z and RAZ expression clones; RAZ diminished viral reactivation induced by Z, as indicated by amount of early replicative antigens (EA-D) detected. The RAZ protein presents a model for transcriptional control unique among the herpesvirus and distinct from analogous viral and cellular repressors. RAZ, by limiting the availability of Z protein, is likely to modulate EBV reactivation.