The nucleolar transcription factor UBF consists of two proteins, UBF1 and UBF2, which originate by alternative splicing. Here we show that deletion of 37 amino acids within the second of five HMG box motifs in UBF2 is important for the dual role of UBF as transcriptional activator and antirepressor. UBF1 is a potent antirepressor and transcriptional activator, whereas the ability of UBF2 to counteract histone H1-mediated repression and to stimulate ribosomal gene transcription both in vivo and in vitro is at least one order of magnitude lower. The difference in transcriptional activity between UBF1 and UBF2 is due to their different binding to the ribosomal gene promoter and enhancer. Apparently, the presence of an intact HMG box2 modulates the sequence-specific binding of UBF to rDNA control elements. However, the interaction of UBF with rDNA does not entirely depend on sequence recognition. Both UBF isoforms bind efficiently to four-way junction DNA, indicating that they recognize defined DNA structures rather than specific sequences. The results demonstrate that the HMG boxes are functionally diverse and that HMG box2 plays an important role in specific binding of UBF to rDNA.