The mouse cytomegalovirus major immediate-early (IE) transcript is differentially spliced to produce two IE proteins: IE1, which functions partly to maintain its own promoter, the major IE promoter (MIEP), free from repression, and IE3, which functions partly as a repressor of MIEP. Paradoxically, the site where transcription of the viral genome occurs is also the site where the greatest amounts of IE3 accumulate. This raises the question of how the repression capabilities of IE3 are controlled so soon after infection. We detected IE3, an activator of early proteins, contemporaneously with gene products of the early M112/113 locus. Both IE3 and the early M112/113 gene products colocalize and coimmunoprecipitate. Protein interaction most likely occurs between IE3 and the 87-kDa splice form of M112/113, because only the 87-kDa component coimmunoprecipitated with IE3. The complex also includes PML. Transiently expressed M112/113 can form large domains alone, even in the absence of full viral genomes or PML. Coexpression of M112/113 products and IE3 results in segregation of IE3 into newly formed M112/113-based domains. Importantly, coexpression eliminates the IE3-based repressive effect on MIEP, as determined by MIEP-driven reporter assays. The consequence of segregating IE3 into the M112/113-containing prereplication domains appears to make IE3 unavailable for binding and repressing MIEP during the earliest stages of infection. These findings establish a new feedback mechanism between IE and early proteins, a new mechanism of promoter control via segregation of the repressor, and a new function for proteins from the M112/113 locus.