Adenovirus E1A protein and cyclic AMP cooperate to induce transcription factor AP-1 and viral gene expression in mouse S49 cells. We report that a protein encoded within the viral E4 gene region acts to counterbalance the induction of AP-1 DNA-binding activity by E1A and cyclic AMP. Studies with mutant adenoviruses demonstrated that in the absence of E4orf4 protein, AP-1 DNA-binding activity is induced to substantially higher levels than in wild-type virus-infected cells. The induction is the result of increased production of JunB and c-Fos proteins. Hyperphosphorylated forms of c-Fos and E1A proteins accumulate in the absence of functional E4orf4 protein. We propose that the E4orf4 protein acts to inhibit the activity of a cellular kinase that phosphorylates both the E1A and c-Fos proteins. Phosphorylation-dependent alterations in the activity of c-Fos, E1A, or some unidentified protein might, then, lead to decreased synthesis of AP-1 components. This E4 function likely plays an important role in natural infections, since a mutant virus unable to express the E4orf4 protein is considerably more cytotoxic than the wild-type virus.