Overexpression of transcriptional activators in transfection assays may inhibit their own activity or interfere with trans-activation by different sequence-specific transcription factors. In this study we show that this phenomenon of transcriptional interference (squelching) can be mimicked in vitro by adding recombinant activation domains to nuclear extracts. We demonstrate that the acidic activation domain of virion protein 16 interferes both with basal transcription from TATA-box promoters and promoters activated by various trans-activators in two different mammalian cell-free transcription systems. This suggests that virion protein 16 interacts with and thereby sequesters a basal transcription factor. In contrast the recombinant activation function 2 (AF-2) of human estrogen receptor does not affect basal promoter activity but inhibits TATA promoters activated by human progesterone receptor (hPR) or Sp 1 as well as the beta-globin and adenovirus major late promoter. By analyzing the effects of AF-2 on DNA binding of hPR and Sp1 we found that AF-2 inhibits the DNA binding activity of hPR, but not Sp1. Our data suggest that the recombinant AF-2 squelches Sp1 trans-activation by sequestering a common coactivator(s), whereas hPR function might be inhibited due to competition for a common cofactor stabilizing hPR dimers or through the formation of inactive heterodimers between AF-2 and hPR.