The general transcription factor TFIIE recruits TFIIH at a late stage of transcription initiation complex formation and markedly stimulates TFIIH-dependent phosphorylation of the carboxy-terminal domain (CTD) of RNA polymerase II. To study this function of TFIIE in more detail, systematic deletion mutations were introduced into the large subunit of TFIIE (TFIIE-alpha) and were analyzed with regard to their effects on TFIIH-dependent CTD phosphorylation, TFIIE-dependent basal and enhancer-dependent transcription, and interactions of TFIIE-alpha with both TFIIE-beta and TFIIH. The amino (N)-terminal half of TFIIE-alpha, which possesses several putative structural motifs, was sufficient for the phosphorylation and transcription activities and for TFIIE-beta interactions, whereas a site effecting both strong interactions with TFIIH and large stimulatory effects on transcription and CTD phosphorylation was localized to an acidic region near the carboxy (C) terminus. The fact that these activities appear to be tightly linked supports the idea that TFIIE interacts physically and functionally with TFIIH and that CTD phosphorylation is essential for transcription under normal conditions. The present results suggest that TFIIE, via its effect on TFIIH, may act as a checkpoint for formation of a preinitiation complex.