The prokaryotic transcription factors GreA and GreB are involved in the regulation of transcript elongation by RNA polymerase (RNAP). Their known activities include suppression of transcription arrest, enhancement of transcription fidelity, and facilitation of the transition from abortive initiation to productive elongation. Presumably, Gre proteins exert their functions by altering the conformation of the enzyme in ternary elongation complexes (TEC) and inducing the cleavage of nascent RNA. GreA and GreB have a similar structural organization and consist of two domains: a C-terminal globular and an extended N-terminal coiled-coil domain. To investigate the functional roles of Gre domains, we expressed separately the N and C-terminal domains of GreA (NTD and CTD, respectively) and characterized their activities with in vitro assays. We demonstrate that the NTD possesses the residual transcript cleavage activity of the wild-type GreA. The CTD does not display any nucleolytic activity; however, it substantially increases the cleavage activity of the NTD. In contrast to NTD, the CTD competes with GreA and GreB for binding to RNAP and inhibits their transcript cleavage and antiarrest activities. Both domains individually and together inhibit transcription elongation. From these results we conclude that the NTD is responsible for the GreA induction of nucleolytic activity while the CTD determines the binding of GreA to RNAP. Both domains are required for full functional activity of GreA.