Tonicity-responsive enhancer binding protein (TonEBP), also known as NFAT5, is a unique member of the NFAT family of transcription factors that regulates gene expression induced by osmotic stress in mammalian cells. Unlike monomeric members of the NFAT family, TonEBP exists as a homodimer and binds asymmetric TonE DNA sites; furthermore, the affinity of TonEBP for DNA is much lower than that of other NFAT proteins. How TonEBP recognizes the TonE site and regulates the activation of hypertonicity response genes has not been clear. Here we show that TonEBP adopts a NF-kappaB-like structure upon binding to DNA, providing a direct structural link between the NFAT and NF-kappaB family of transcription factors. We also show that TonEBP completely encircles its DNA target and present biochemical evidence that the DNA encirclement may lead to increased kinetic stability of the TonEBP-DNA complex. Thus, the list of proteins that bind DNA by encirclement is now expanded to include sequence-specific transcription factors.