The transcription regulatory protein Sp3 shares more than 90% sequence homology with Sp1 in the DNA-binding domain and they bind to the same cognate DNA-element. However, the transcriptional activities of these two Sp-family factors are not equivalent. While Sp1 functions strictly as a transcriptional activator, Sp3 has been shown to be transcriptionally inactive for promoters containing multiple Sp-binding sites. In the present study, we show that the DNA-binding property of Sp3 is promoter dependent and is different from Sp1. The 116 kDa Sp3 polypeptide binds as a monomer to a single Sp-binding site but readily forms slower migrating complexes with adjacent Sp-binding sites. The slower migrating Sp3-DNA complexes are significantly more stable than monomeric Sp3-DNA complexes or multimeric Sp1-DNA complexes. As a consequence, Sp3 can efficiently compete with Sp1 for binding to regions containing multiple Sp sites. The transcription regulatory function of Sp3 is also significantly different from Sp1. Unlike Sp1, Sp3 does not synergistically activate transcription of promoters containing multiple Sp-binding sites. Therefore, although Sp3 is a transcription activator, Sp3 reduces Sp1-dependent transcription of promoters containing adjacent Sp-binding sites by competing with Sp1 for promoter occupancy and thereby blocking the synergistic transactivation function of Sp1. Taken together, this study provides a possible mechanism of the promoter-specific transcription repression function of Sp3.