The yeast regulatory gene PHO2 encodes a protein assumed to activate, in concert with the PHO4 protein, the transcription of the repressible acid phosphatase-coding gene PHO5. The PHO2 gene was cloned and sequenced. Northern-blot analysis revealed a low and Pi-independent transcription level. We stress the presence of two potential DNA-binding structures, one of them as part of a homeodomain-similar sequence, in the deduced PHO2 protein. Our data indicate that quite a large portion of the C-terminal end of the PHO2 activator is dispensable for derepression of PHO5. Disruption analysis suggests the presence of a nuclear address signal in the N-terminal region. We show that the PHO2 function in the regulation of phosphate metabolism can be partially fulfilled by overproduced PHO4. Inability of pho2 mutants to sporulate indicates a possible involvement of PHO2 products in the regulation of genes related to the life cycle.