Here we show a novel pathway of transcriptional regulation of a DNA-binding transcription factor by coupled interaction and modification (e.g., acetylation) through the DNA-binding domain (DBD). The oncogenic regulator SET was isolated by affinity purification of factors interacting with the DBD of the cardiovascular transcription factor KLF5. SET negatively regulated KLF5 DNA binding, transactivation, and cell-proliferative activities. Down-regulation of the negative regulator SET was seen in response to KLF5-mediated gene activation. The coactivator/acetylase p300, on the other hand, interacted with and acetylated KLF5 DBD, and activated its transcription. Interestingly, SET inhibited KLF5 acetylation, and a nonacetylated mutant of KLF5 showed reduced transcriptional activation and cell growth complementary to the actions of SET. These findings suggest a new pathway for regulation of a DNA-binding transcription factor on the DBD through interaction and coupled acetylation by two opposing regulatory factors of a coactivator/acetylase and a negative cofactor harboring activity to inhibit acetylation.