The yeast three-hybrid system has become a useful tool in analyzing RNA-protein interactions. An RNA sequence is tested in combination with an RNA-binding protein linked to a transcription activation domain (AD). A productive RNA-protein interaction activates a reporter gene in vivo. The system has been used to test candidate RNA-protein pairs, to isolate mutations in each interacting partner, and to identify proteins that bind a given RNA sequence. However, the relationship between reporter gene activation and in vitro affinity of an RNA-protein interaction has not been examined systematically. This limits interpretation of the data and complicates the development of new strategies. Here, we analyze several key parameters of the three-hybrid system, using as a model the interaction of a PUF protein, FBF-1, with a range of RNA targets. We compare activation of two reporter genes as a function of the in vitro affinity of the interaction. HIS3 and LacZ expression levels are directly related to affinity over a 10-fold range of Kd. Expression of the reporter genes also is directly related to the abundance of the activation domain fusion protein. We describe a new yeast strain, YBZ1, that simplifies screening of cDNA/AD libraries. This strain possesses a tandem, head-to-tail dimer of a high-affinity variant of MS2 coat protein, fused to a monomer of the LexA DNA-binding protein. We show that the use of this strain in cDNA library screens increases the number of genuine, sequence-specific positives detected, and at the same time reduces the background of false, RNA-independent positives.