The promoters of Drosophila genes encoding DNA replication-related proteins contain transcription regulatory elements consisting of an 8-bp palindromic DNA replication-related element (DRE) sequence (5'-TATCGATA). The specific DRE-binding factor (DREF), a homodimer of the polypeptide with 709 amino acid residues, is a positive trans-acting factor for transcription of DRE-containing genes. Both DRE binding and dimer formation are associated with residues 16 to 115 of the N-terminal region. We have established transgenic flies expressing the full-length DREF polypeptide or its N-terminal fragment (amino acid residues 1 to 125) under the control of the heat shock promoter, the salivary gland-specific promoter, or the eye imaginal disc-specific promoter. Heat shock induction of the N-terminal fragment during embryonic, larval, or pupal stages caused greater than 50% lethality. This lethality was overcome by coexpression of the full-length DREF. In salivary glands of the transgenic larvae expressing the N-terminal fragment, this fragment formed a homodimer and a heterodimer with the endogenous DREF. Ectopic expression of the N-terminal fragment in salivary gland cells reduced the contents of mRNAs for the 180-kDa subunit of DNA polymerase alpha and for dE2F and the extent of DNA endoreplication. Ectopic expression of the N-terminal fragment in the eye imaginal discs significantly reduced DNA replication in cells at the second mitotic wave. The lines of evidence suggest that the N-terminal fragment can impede the endogenous DREF function in a dominant negative manner and that DREF is required for normal DNA replication in both mitotic cell cycle and endo cycle.