In this communication we identify and initially characterize two antagonistic activities in a Xenopus oocyte extract that can modulate the in vitro transcription of RNA polymerase III (pol III) genes (5 S RNA and tRNA genes). It was found that preincubation of an inhibitory factor, referred to here as fraction I, with fractions containing TFIIIB and TFIIIC/pol III leads to the loss of a reaction's ability to support transcription. This inactivation process, which required ATP or adenylylimidodiphosphate (but could not use ADP), occurred only in the absence of a 5 S RNA or tRNA gene containing plasmid. Under conditions in which transcription was lost, a loss in TFIIIC's ability to specifically bind to the tRNA gene was also observed. An activity found in the 'A' fraction, which was first recognized for its ability to stimulate transcription, was found to inhibit and actually reverse the observed inactivation of transcription. This activity, referred to here as fraction A2, accomplished this reactivation regardless of whether the gene was present or not, but only when a hydrolyzable form of ATP was used in the inactivation process. Transcription in an inactivated reaction could also be restored by addition of fresh transcription factors. The data presented in this paper are consistent with a model in which fraction I and fraction A2 modulate transcription through the activation and inactivation of one or more positive transcription factors.