Yeast transcription factor tau (transcription factor IIIC) specifically interacts with tRNA genes, binding to both the A block and the B block elements of the internal promoter. To study the influence of A block-B block spacing, we analyzed the binding of purified tau protein to a series of internally deleted yeast tRNA(3Leu) genes with A and B blocks separated by 0 to 74 base pairs. Optimal binding occurred with genes having A block-B block distances of 30-60 base pairs; the relative helical orientation of the A and B blocks was unimportant. Results from DNase I "footprinting" and lambda exonuclease protection experiments were consistent with these findings and further revealed that changes in A block-B block distance primarily affect the ability of tau to interact with A block sequences; B block interactions are unaltered. When the A block-B block distance is 17 base pairs or less, tau interacts with a sequence located 15 base pairs upstream of the normal A block, and a new RNA initiation site is observed by in vitro transcription. We propose that the initial binding of tau to the B block activates transcription by enhancing its ability to bind at the A block, and that the A block interaction ultimately directs initiation by RNA polymerase III.