The proximal promoters of all MHC class II genes contain a sequence element, the 19-bp X box, that is conserved in both sequence and position. Extensive analysis using a wide variety of approaches has demonstrated that the integrity of the X box is essential for transcription initiation from all class II genes studied. However, the X box is now recognized to contain two subregions, termed X1 and X2. Radiolabeled oligonucleotides corresponding to the X2 box of the MHC class II genes DPA and DQB were used to screen B cell and T cell expression libraries. A novel cDNA, termed XBR (X box repressor), encoding a putative zinc finger protein that binds specifically to the DPA X2 box was isolated from a human T cell line. The XBR gene encodes a 7-kb message that is ubiquitously transcribed, although at higher levels in tissues of the lymphocytic compartment. Southern blots indicate that this gene is single copy in primates and contains regions that are highly divergent in other species. Overexpression of XBR in a B cell line resulted in a dramatic reduction of transcription from a reporter gene construct driven by the DPA promoter, but not from similar constructs with mutations in the X2 box. Similarly, overexpression of XBR reduced induction of reporter gene activity driven from the DPA promoter in HeLa cells treated with IFN-gamma. XBR may, therefore, mediate transcriptional repression, thus preventing inappropriate MHC class II expression. XBR function may in part explain the dominant trans-acting repression of MHC class II expression reported in cell fusion experiments.