Copper homeostasis in yeast involves a copper binding protein, metallothionein, and a trans-acting regulatory protein that activates transcription of the metallothionein gene in response to copper ions. We show that the regulatory protein specifically binds to the metallothionein gene control sequences in the presence, but not in the absence, of copper. Both the DNA binding and metalloregulatory functions of the transacting factor are contained within its aminoterminal domain, and partial proteolysis experiments show that copper activates this domain by causing a major switch in its conformation. Silver also activates the DNA binding domain in vitro and induces metallothionein gene transcription in vivo. We propose a novel copper cluster model for the DNA binding domain based on its surprising structural similarities to metallothionein itself.