PU.1 and BSAP are transcription factors crucial for proper B-cell development. Absence of PU.1 results in loss of B, T, and myeloid cells, while absence of BSAP results in an early block in B-cell differentiation. Both of these proteins bind to the immunoglobulin kappa chain 3' enhancer, which is developmentally regulated during B-cell differentiation. We find here that BSAP can repress 3' enhancer activity. This repression can occur in plasmacytoma lines or in a non-B-cell line in which the enhancer is activated by addition of the appropriate enhancer binding transcription factors. We show that the transcription factor PU.1 is a target of the BSAP-mediated repression. Although PU.1 and BSAP can physically interact through their respective DNA binding domains, this interaction does not affect DNA binding. When PU.1 function is assayed in isolation on a multimerized PU.1 binding site, BSAP targets a portion of the PU.1 transactivation domain (residues 7 to 30) for repression. The BSAP inhibitory domain (residues 358 to 385) is needed for this repression. Interestingly, the coactivator protein p300 can eliminate this BSAP-mediated repression. We also show that PU.1 can inhibit BSAP transactivation and that this repression requires PU.1 amino acids 7 to 30. Transfection of p300 resulted in only a partial reversal of PU.1-mediated repression of BSAP. When PU.1 function is assayed in the context of the immunoglobulin kappa chain 3' enhancer and associated binding proteins, BSAP represses PU.1 function by a distinct mechanism. This repression does not require the PU.1 transactivation or PEST domains and cannot be reversed by p300 expression. The possible roles of BSAP and PU.1 antagonistic activities in hematopoietic development are discussed.