A telomere-binding protein heterodimer of 56-kD (alpha) and 41-kD (beta) subunits binds to the single-stranded (T4G4)2 terminus of each Oxytricha nova macronuclear DNA molecule. The alpha-subunit by itself binds to telomeric DNA. The beta-subunit alone does not bind to DNA specifically but interacts with the alpha-subunit to form a very stable ternary complex. We show that the formation of alpha-beta-DNA ternary complex is extremely cooperative. Furthermore, the binary complex (alpha-DNA) has a dissociation half-life of much less than 1 min; addition of the beta-subunit increases the half-life to approximately 100 hrs. Libraries of plasmids with random deletions of the open reading frame for the alpha-subunit were introduced into Escherichia coli, and extracts were subsequently checked for both protein expression and DNA-binding activity with or without added beta-subunit. The alpha-subunit was found to contain two structurally separable domains with distinct functions. The amino-terminal two-thirds is necessary and sufficient for sequence-specific DNA binding. The carboxy-terminal one-third is responsible for alpha/beta-subunit interactions. When expressed separately in E. coli, purified, and mixed together, these two domains reconstitute the activity of the wild-type alpha-subunit (trans-complementation in vitro). The amino-terminal two-thirds of the beta-subunit is necessary and sufficient both for alpha/beta-subunit interactions and for ternary complex formation. We conclude that the alpha-subunit of the telomere-binding protein, like many transcription factors, has separable DNA-binding and protein-protein interaction domains.