The Y box factors bind to a specific DNA sequence (the Y box, containing a reverse CCAAT element) and have been implicated in the regulation of transcription. We have used deletion mutagenesis to define the protein domains of two Xenopus Y box factors, FRG Y1 and FRG Y2, that are essential for DNA binding, multimerization, and transcription. A domain of the Y box factors homologous to an Escherichia coli cold shock protein is required for DNA binding. Both the E. coli protein and the Y box factors recognize DNA sequences with similar selectivity. The conserved region between these proteins does not contain any previously defined DNA-binding motifs. The hydrophilic C-terminal tail of the proteins contributes to the assembly of nucleoprotein complexes. This region contains an unusual pattern of basic and acidic amino acids and represents a new type of domain mediating protein-protein interactions in transcription factors. Both the DNA-binding and the multimerization domains are important for stimulating transcription from the Xenopus hsp70 promoter in vitro.