CHOP (GADD153) is a mammalian nuclear protein that dimerizes with members of the C/EBP family of transcription factors. Absent under normal growth conditions, CHOP is induced by the stress encountered during nutrient deprivation, the acute-phase response, and treatment of cells with certain toxins. The basic region of CHOP deviates considerably in sequence from that of other C/EBP proteins, and CHOP-C/EBP heterodimers are incapable of binding to a common class of C/EBP sites. With respect to such sites, CHOP serves as an inhibitor of the activity of C/EBP proteins. However, recent studies indicate that certain functions of CHOP, such as the induction of growth arrest by overexpression of the wild-type protein and oncogenic transformation by the TLS-CHOP fusion protein, require an intact basic region, suggesting that DNA binding by CHOP may be implicated in these activities. In this study an in vitro PCR-based site selection assay was used to identify sequences bound by CHOP-C/EBP dimers. These sequences were found to contain a unique core element PuPuPuTGCAAT(A/C)CCC. Competition in DNA-binding assays, DNase I footprint analysis, and methylation interference demonstrate that the binding is sequence specific. Deletions in the basic region of CHOP lead to a loss of DNA binding, suggesting that CHOP participates in this process. Stress induction in NIH 3T3 cells leads to the appearance of CHOP-containing DNA-binding activity. CHOP is found to contain a transcriptional activation domain which is inducible by cellular stress, lending further support to the notion that the protein can function as a positively acting transcription factor. We conclude that CHOP may serve a dual role both as an inhibitor of the ability of C/EBP proteins to activate some target genes and as a direct activator of others.