Proteins H-NS and Hha form a nucleoprotein complex that modulates expression of the thermoregulated hly operon of Escherichia coli. We have been able to identify two H-NS binding sites in the hly regulatory region. One of them partially overlaps the promoter region (site II), and the other is located about 2 kbp upstream (site I). In contrast, Hha protein did not show any preference for specific sequences. In vitro, temperature influences the affinity of H-NS for a DNA fragment containing both binding sites and H-NS-mediated repression of hly operon transcription. Deletion analysis of the hly regulatory region confirms the relevance of site I for thermoregulation of this operon. We present a model to explain the temperature-modulated repression of the hly operon, based on the experiments reported here and other, preexisting data.