Kaposi's sarcoma-associated herpesvirus (KSHV) is a human gammaherpesvirus that has been implicated in the pathogenesis of Kaposi's sarcoma and B-cell neoplasms. The genomic organization of KSHV is similar to that of Epstein-Barr virus (EBV). EBV encodes two transcriptional factors, Rta and Zta, which functionally interact to transactivate EBV genes during replication and reactivation from latency. KSHV encodes a basic leucine zipper protein (K-bZIP), a homologue of EBV Zta, and K-Rta, the homologue of EBV Rta. EBV Rta and Zta are strong transcriptional transactivators. Although there is ample evidence that K-Rta is a potent transactivator, the role of K-bZIP as a transcriptional factor is much less clear. In this study, we report that K-bZIP modulates K-Rta function. We show that K-bZIP directly interacts with K-Rta in vivo and in vitro. This association is specific, requiring the basic domain (amino acids 122 to 189) of K-bZIP and a specific region (amino acids 499 to 550) of K-Rta, and can be detected with K-bZIP and K-Rta endogenously expressed in BCBL-1 cells treated with tetradecanoyl phorbol acetate. The functional relevance of this association was revealed by the observation that K-bZIP represses the transactivation of the ORF57 promoter by K-Rta in a dose-dependent manner. K-bZIP lacking the interaction domain fails to repress K-Rta-mediated transactivation; this finding attests to the specificity of the repression. Interestingly, this repression is not observed for the promoter of polyadenylated nuclear (PAN) RNA, another target of K-Rta; thus, repression is promoter dependent. Finally, we provide evidence that the modulation of K-Rta by K-bZIP also occurs in vivo during reactivation of the viral genome in BCBL-1 cells. When K-bZIP is overexpressed in BCBL-1 cells, the level of expression of ORF57 but not PAN RNA is repressed. These data support the model that one function of K-bZIP is to modulate the activity of the transcriptional transactivator K-Rta.