We have characterized an element (the differentiation response element, DRE) in the promoter region of the c-jun gene that is both necessary and sufficient for retinoic acid- (RA-) and adenovirus E1A-mediated enhancement of the expression of the c-jun gene during the differentiation of F9 cells.  Activation transcription factor (ATF-2), adenovirus E1A-associated protein (p300) and Jun-dimerization protein (JDP2) cooperate in the regulation of transcription of the c-jun gene.  JDP2 serves as a repressor of the AP-1 sequence and inhibits the transactivation of the c-jun gene by p300 plus ATF-2, via recruitment of the histone deacetylase complex (HDAC3), thereby repressing the RA-induced transcription of the c-jun gene and as a consequence, inhibiting the RA-mediated differentiation of F9 cells.  These observations suggest that the HDAC3/JDP2 and p300/ATF-2 complexes play a critical role in controlling the RA-induced differentiation of F9 cells.  We also found that JDP2 has activities associated with histone binding and the inhibition of histone acetyltransferase (INHAT), as well as with the regulation of chromatin assembly.  Moreover, assays of nucleosome assembly in vitro demonstrated that JDP2 also has histone-chaperon activity. Our results reveal that not only JDP2 is a sequence specific DNA-binding protein and but JDP2 also controls the transcription of genes with the AP-1 sequence in their promoters by direct regulation of the modification of histones