The uaY gene encodes a transcriptional activator mediating uric acid induction of at least nine genes of the purine-utilization pathway. In this article, we characterize a loss-of-function mutation, uaY205, as a 16 bp deletion that results in premature translation termination, and substitutes the C-terminal 63 amino acids for 13 amino acid residues. Reversion analysis demonstrates that the C-terminal 63 amino acid residues are unnecessary for UaY function, and that the loss-of-function phenotype resulting from the uaY205 mutation is caused by the new amino acid sequence present in the mutant protein. Revertants in two different frames (wild type and +1) restore function but show subtle differences in the expression of genes controlled by the UaY protein. Two strains showing elevated expression of genes under UaY control were shown to carry, in addition to a mutation leading to the recovery of the wild-type open reading frame, mutations in unlinked genes. Using crude extracts of Aspergillus nidulans, we have been able to detect, for the first time, in transcription factors of this class, specific retardation of a promoter probe. The binding activity is at least partially dependent on the presence of inducer. The gel shift experiments show that the novel inhibitory sequence present in the UaY205 protein can act either by affecting the stability of the protein, or via an inter- or intramolecular interaction impairing the specific DNA-binding activity.