The afsR gene of Streptomyces coelicolor A3(2) complements afsB mutations affecting production of pigmented antibiotics. It also directs pigment production in Streptomyces lividans when carried on a plasmid vector. Nucleotide sequencing of the afsR gene revealed that it codes for a 993-amino acid protein (Mr 105,600) with A- and B-type ATP-binding consensus sequences at its N-terminal portion and two DNA-binding consensus sequences with a helix-turn-helix motif at its C-terminal portion. Each of the N- and C-terminal halves was capable of conferring pigment production, to some extent, in S. lividans, when carried separately on a multicopy plasmid. In addition, expression in trans of the two regions on the same plasmid conferred pigment production to almost the same extent as did the intact afsR gene. Mutations at the two ATP-binding consensus sequences, that were generated by in vitro site-directed mutagenesis, revealed their functional importance. Disruption of the S. coelicolor A3(2) chromosomal afsR gene in either the N- or C-terminal half using phage phi C31 KC515 resulted in significant, but not complete, loss of pigment production. These data suggest that the AfsR protein comprises two domains, viz., an ATP-binding and a DNA-binding domain, each of which could function as a positive regulator for pigment production. These afsR mutants sporulate normally. In addition to an internal promoter, which we previously detected in the middle of the AfsR coding region, S1 nuclease mapping revealed two tandem transcriptional start points, separated by 64 bp, upstream from a putative ATG start codon of the AfsR product.