We determined the structure of a 1.1-kb cytoplasmic polyadenylated RNA transcribed from a region of the bovine herpesvirus 4 (BHV-4) genome not conserved among gammaherpesviruses by sequencing its cDNA, by S1 nuclease analysis, and by primer extension analysis. We found that the RNA consists of a short, approximately 193-nucleotide (nt), 5' exon spliced to a 799-nt 3' exon and contains two short (53 and 57 codons) overlapping open reading frames (ORFs). The 53-codon ORF was previously designated BORFE1. Neither ORF exhibits detectable amino acid sequence homology with ORFs of other gammaherpesviruses. The 1.1-kb RNA promoter-regulatory region was specifically transactivated by the BHV-4 IE2 gene product, a homolog of the Epstein-Barr virus R transactivator, in cotransfection assays. In gel retardation experiments, IE2 protein formed a complex with DNA in a 129-bp fragment between -23 and -151 relative to the transcription start site of the 1.1-kb RNA, and less efficiently with a 57-bp subfragment between -78 and -22. A sequence similar to sequences of IE2-binding fragments of other BHV-4 IE2 responsive promoters was found partly in the 57-bp subfragment, extending into the portion of the 129-bp fragment not found in the 57-bp fragment. The 129-bp fragment, but not the 57-bp fragment, was sufficient for transactivation of a promoterless chloramphenicol acetyl transferase (CAT) reporter gene by IE2. However, the 129-bp fragment did not function efficiently as an IE2-responsive enhancer when inserted approximately 140 base pairs (bp) 5' to the transcription start site of a CAT reporter gene driven by an enhancerless simian virus 40 early promoter. Based on this and other observations, we propose that IE2 functions as a promoter factor rather than an enhancer factor.