B-myc is a recently described myc gene whose product has not been functionally characterized. The predicted product of B-myc is a 168-amino-acid protein with extensive homology to the c-Myc amino-terminal region, previously shown to contain a transcriptional activation domain. We hypothesized that B-Myc might also function in transcriptional regulation, although its role in regulating gene expression is predicted to be unique, because B-Myc lacks the specific DNA-binding motif found in other Myc proteins. To determine whether B-Myc could interact with the transcriptional machinery, we studied the transcriptional activation properties of a chimeric protein containing B-Myc sequences fused to the DNA-binding domain of the yeast transcriptional activator GAL4 (GAL4-B-Myc). We found that GAL4-B-Myc strongly activated expression of a GAL4-regulated reporter gene in mammalian cells. In addition, full-length B-Myc was able to inhibit or squelch reporter gene activation by a GAL4 chimeric protein containing the c-Myc transcriptional activation domain. We also observed that B-Myc dramatically inhibited the neoplastic cotransforming activity of c-Myc and activated Ras in rat embryo cells. Because B-Myc inhibits both neoplastic transformation and transcriptional activation by c-Myc, we suggest that the transforming activity of c-Myc is related to its ability to regulate transcription. Whether B-Myc functions biologically to squelch transcription and/or to regulate transcription through a specific DNA-binding protein remains unestablished.