Rtg1p is a basic helix-loop-helix transcription factor in the yeast Saccharomyces cerevisiae that is required for basal and regulated expression of CIT2, the gene encoding a peroxisomal isoform of citrate synthase. In respiratory incompetent rho degree petite cells, CIT2 transcription is elevated as much as 30-fold compared with respiratory competent rho + cells. Here we provide evidence that Rtg1p interacts directly with a CIT2 upstream activation site (UASr) and that the rho degree/rho + regulation is not due to a change in the levels of Rtg1p. A fusion protein consisting of the DNA binding domain of Gal4p fused to the NH2 terminus of the full-length wild-type Rtg1p was able to transactivate an integrated LacZ reporter under control of the Gal4p-responsive GAL1 UASG in a rho degree/rho(+)-dependent manner. Other Gal4p fusions to deletions or mutations of Rtg1p indicate that the helix-loop-helix domain is essential for transactivation. Regulated expression of CIT2 also requires the RTG2 gene product. The Gal4-Rtg1p fusion was unable to transactivate the LacZ reporter gene in a strain deleted for RTG2, suggesting that the RTG2 product does not act independently of Rtg1p in the rho degree/rho + transcriptional response.