The Oct-2 transcription factor contains an inhibitory domain which is able to repress transcription following DNA binding. Here we show that within the neuronally expressed Oct-2.5 form, the inhibitory domain can strongly inhibit activation by transcription factor activation domains which are either composed predominantly of acidic residues or contain the HOB motif, whereas it has a weaker effect or no effect on proline-rich activation domains and on a glutamine-rich domain. In contrast, the isolated inhibitory domain of Oct-2 can efficiently repress all types of activation domains. This effect is observed however, only on TATA box-containing promoters and not on promoters containing an initiator motif. This widespread inhibition of different activation domains and its dependence on the nature of the basal promoter elements indicate that the inhibitory domain is likely to act by contacting a common downstream target of activation domains within the basal transcriptional complex bound at the TATA box rather than quenching specific activation domains by direct interaction. These effects are discussed in terms of the functional role of the inhibitory domain within Oct-2.5 and the mechanism by which it acts.