Transcription of the Saccharomyces cerevisiae metallothionein gene CUP1 is induced in response to high environmental levels of copper. Induction requires the ACE1 gene product, which binds to specific sites in the promoter region of the CUP1 gene. In this study, we found that deleting the entire coding sequence of the ACE1 gene resulted in a decrease in basal-level transcription of CUP1 to low but detectable levels and conferred a copper-sensitive phenotype to the cells. We have isolated a gene, designated ACE2, which when present on a high-copy-number plasmid suppresses the copper-sensitive phenotype of an ace1-deletion strain. The presence of multiple copies of the ACE2 gene enhanced expression of an unlinked CUP1-lacZ fusion integrated in the yeast genome and resulted in an increase in the steady-state levels of CUP1 mRNA in an ace1-deletion background. A large deletion of the coding region of the genomic copy of ACE2 resulted in a decrease in steady-state levels of CUP1 mRNA, indicating that ACE2 plays a role in regulating basal-level expression of CUP1. The ACE2 open reading frame encodes a polypeptide of 770 amino acids, with putative zinc finger structures near the carboxyl terminus. This protein is 37% identical to the SWI5 gene product, an activator of HO gene transcription in S. cerevisiae, suggesting that ACE2 and SWI5 may have functional similarities.