Sp3 is a member of the Sp family of transcription factors and binds to DNA with affinity and specificity comparable to that of Sp1. We demonstrate that Sp3 is a bifunctional transcription factor that can both activate and repress transcription. Gene fusion experiments in mammalian cells demonstrate that the Sp3 activation potential is distributed over an extensive glutamine-rich N-terminal region, whereas the repressor activity has been mapped in a 72-amino acid region located at the 5' of the zinc finger DNA-binding domain. We demonstrated that the repression activity is strictly dependent on the context of the DNA-binding sites bound by Sp3. We found that Sp3 represses transcription of promoters bearing multiple GAL4 DNA-binding sites, whereas it activates isogenic reporters containing a single GAL4-binding site. Transfection experiments in Drosophila cells that lack endogenous Sp activity demonstrated that Sp3 does not possess an active repression domain that can function in insect cells, rather it is a weak transcriptional activator of the c-myc promoter. Our results strongly suggest that Sp3 is a dual-function regulator whose activity is dependent upon both the promoter and the cellular context.