Human transcription factor TFIIB, a protein of 316 amino acids, was subjected to limited proteolysis in order to define stable structural domains. We find that the C-terminal region of TFIIB, residues 106-316, is relatively stable, while the N-terminal region is very sensitive to proteases. Like full-length TFIIB, the stable domain, which we refer to as TFIIBc, interacts with the TATA-binding protein (TBP) on DNA. However, TFIIBc is unable to substitute for TFIIB in an in vitro transcription assay. We show by gel mobility-shift experiments that TFIIBc arrests formation of the transcription complex after binding to TBP, and we conclude that the N-terminal region of TFIIB, which is missing from TFIIBc, is responsible for the recruitment of RNA polymerase II to the promoter. We also show that TFIIBc inhibits transcription by competing with full-length TFIIB for the interaction with TBP, either in the presence or in the absence of the TBP-associated factors. The acidic transcriptional activator GAL4-VP16 does not favor the assembly of the functional transcription complex over the nonfunctional complex containing TFIIBc. Thus, if the function of GAL4-VP16 is enhancement of the interaction between TFIIB and the TFIID-DNA complex, then this function can also be exerted on the protease-resistant domain TFIIBc.