The mechanism of action of cro protein was probed by measuring its ability to protect DNA against methylation by dimethyl sulfate and its effect on transcription in vitro. The cro protein binds to the same three sites in the right operator (OR) of bacteriophage lambda DNA as does the lambda repressor. Dimethyl sulfate protection experiments reveal major groove contacts for both proteins, and cro protein protects from methylation a subset of those purines protected by lambda repressor. These experiments also show that the relative affinity of these two proteins for the three operator sites is different: whereas lambda repressor binds with an affinity OR1 greater than OR2 greater than OR3, the order for cro protein is OR3 greater than (OR1, OR2). As predicted by these results, cro protein, like the lambda repressor, blocks in vitro transcription of cI and cro from the two divergent promoters that overlap OR. Also as predicted, transcription of cI is turned off at lower cro protein concentrations than is transcription of cro, whereas the opposite order of repression is obtained with lambda repressor. These results describe the molecular mechanism of cro protein action and show that two regulatory proteins can bind to the same three adjacent sites in DNA with markedly different consequences.