Heme is a prosthetic group for numerous enzymes, cytochromes and globins, and it binds tightly, sometimes covalently, to these proteins. Interestingly, heme also potentiates binding of the yeast transcriptional activator HAP1 to DNA and inhibits mitochondrial import of the mammalian delta-aminolevulinate synthase (ALAS) and the catalytic activity of the reticulocyte kinase, HRI. All three of these proteins contain a short sequence, the heme regulatory motif (HRM), that occurs six times adjacent to the HAP1 DNA binding domain, twice in the leader targeting sequence of ALAS and twice near the catalytic domain of the HRI kinase. Here we show that a 10 amino acid peptide containing the HRM consensus binds to heme in the micromolar range, and shifts the heme absorption spectrum to a longer wavelength, a direction opposite to the change caused by cytochromes or globins. Further, we show that a single HRM regulates the acidic activation domains of HAP1 and GAL4 independently of regulation of DNA binding of the transcription factors. These findings thus establish a novel heme binding sequence which is structurally distinct from sequences in globins or cytochromes and which has a regulatory function.