In Saccharomyces cerevisiae, RDS2 encodes a zinc cluster transcription factor with unknown function. Here, we unravel a key function of Rds2 in gluconeogenesis using chromatin immunoprecipitation-chip technology. While we observed that Rds2 binds to only a few promoters in glucose-containing medium, it binds many additional genes when the medium is shifted to ethanol, a nonfermentable carbon source. Interestingly, many of these genes are involved in gluconeogenesis, the tricarboxylic acid cycle, and the glyoxylate cycle. Importantly, we show that Rds2 has a dual function: it directly activates the expression of gluconeogenic structural genes while it represses the expression of negative regulators of this pathway. We also show that the purified DNA binding domain of Rds2 binds in vitro to carbon source response elements found in the promoters of target genes. Finally, we show that upon a shift to ethanol, Rds2 activation is correlated with its hyperphosphorylation by the Snf1 kinase. In summary, we have characterized Rds2 as a novel major regulator of gluconeogenesis.