A member of the polyomavirus enhancer binding protein 2/core binding factor (PEBP2/CBF) is composed of PEBP2αB1/AML1 (as the α subunit) and a β subunit. It plays an essential role in definitive hematopoiesis and is frequently involved in the chromosomal abnormalities associated with leukemia. In the present study, we report functionally separable modular structures in PEBP2αB1 for DNA binding and for transcriptional activation. DNA binding through the Runt domain of PEBP2αB1 was hindered by the adjacent carboxy-terminal region, and this inhibition was relieved by interaction with the β subunit. Utilizing a reporter assay system in which both the α and β subunits are required to achieve strong transactivation, we uncovered the presence of transcriptional activation and inhibitory domains in PEBP2αB1 that were only apparent in the presence of the β subunit. The inhibitory domain keeps the full transactivation potential of full-length PEBP2αB1 below its maximum potential. Fusion of the transactivation domain of PEBP2αB1 to the yeast GAL4 DNA-binding domain conferred transactivation potential, but further addition of the inhibitory domain diminished the activity. These results suggest that the activity of the α subunit as a transcriptional activator is regulated intramolecularly as well as by the β subunit. PEBP2αB1 and the β subunit were targeted to the nuclear matrix via signals distinct from the nuclear localization signal. Moreover, the transactivation domain by itself was capable of associating with the nuclear matrix, which implies the existence of a relationship between transactivation and nuclear matrix attachment.