In Drosophila and human cells, the TATA binding protein (TBP) of the transcription factor IID (TFIID) complex is tightly associated with multiple subunits termed TBP-associated factors (TAFs) that are essential for mediating regulation of RNA polymerase II transcription. The Drosophila TAF(II)150 has now been molecularly cloned and biochemically characterized. The deduced primary amino acid sequence of dTAF(II)150 reveals a striking similarity to the essential yeast gene, TSM-1. Furthermore, like dTAF(II)150, the TSM-1 protein is found associated with the TBP in vivo, thus identifying the first yeast homolog of a TAF associated with TFIID. Both the product of TSM-1 and dTAF(II)150 bind directly to TBP and dTAF(II)250, demonstrating a functional similarity between human and yeast TAFs. Surprisingly, DNA binding studies indicate that purified recombinant dTAF(II)150 binds specifically to DNA sequences overlapping the start site of transcription. The data demonstrate that at least one of the TAFs is a sequence-specific DNA binding protein and that dTAF(II)150 together with TBP are responsible for TFIID interactions with an extended region of the core promoter.