Interferon regulatory factors (IRFs) bind to the interferon-stimulated response element (ISRE) and regulate interferon- and virus-mediated gene expression. IRF-1 acts as a transcriptional activator, while IRF-2 acts as a repressor. Here we show that IRF-1 and IRF-2 bind to both cellular TFIIB, a component of the basal transcription machinery, and recombinant TFIIB (rTFIIB) and that this protein-protein interaction facilitates binding of IRFs to the ISRE. A functional interaction between TFIIB and IRF was assessed by a newly established in vitro transcription assay in which recombinant IRF-1 (rIRF-1) stimulated transcription specifically from an ISRE-containing template. With this assay we show that rIRF-1 and rTFIIB cooperatively enhance the ISRE promoter in vitro. We found that the activity of an ISRE-containing promoter was cooperatively enhanced upon cotransfection of TFIIB and IRF-1 cDNAs into P19 embryonal carcinoma cells, further demonstrating functional interactions in vivo. The cooperative enhancement by TFIIB and IRF-1 was independent of the TATA sequence in the ISRE promoter but dependent on the initiator sequence (Inr) and was abolished when P19 cells were induced to differentiate by retinoic acid treatment. In contrast, cotransfection of TFIIB and IRF-1 into NIH 3T3 cells resulted in a dose-dependent repression of promoter activation which occurred in a TATA-dependent manner. Our results indicate the presence of a cell type-specific factor that mediates the functional interaction between IRFs and TFIIB and that acts in conjunction with the requirement of TATA and Inr for promoter activation.