Mitochondrial transcription factor A (TFAM) is an abundant human mitochondrial High Mobility Group Box (HMGB) protein. TFAM is an architectural protein that shapes mitochondrial DNA (mtDNA) and regulates mitochondrial transcription. Sequence-specific binding of TFAM to DNA upstream of the light-strand promoter (LSP) leads to bending that correlates with transactivation of this promoter. Here we use a dual promoter construct containing both LSP, HSP1 and the natural inter-promoter region (IPR) to understand how TFAM binding governs transcription activation. We show that the IPR contributes to TFAM transactivation of HSP1, while removal of the carboxyl-terminal tail of TFAM (TFAM-ΔCT26) leads to a complete loss of transactivation of HSP1, with only minimal effects on LSP, suggesting a different biophysical mechanism for TFAM-mediated transcription activation from HSP1. To understand the mechanism by which TFAM activates HSP1 transcription, we used atomic force microscopy (AFM) in liquid to probe the effect of TFAM on the IPR construct. We observe that at the low concentrations of TFAM where transcription activation is high, TFAM induces the formation of DNA loops in a region defined by the IPR, with TFAM present at the strand crossing point. Under the same conditions, TFAM-ΔCT26 fails to induce DNA looping. While random DNA also forms loops in the presence of TFAM, TFAM is twice as likely to mediate the loops when the IPR sequence is present. Optical tweezers experiments also demonstrate that TFAM stabilizes DNA loops, which require significant force to break. Taken together, our results are consistent with sequence-specific DNA looping contributing to TFAM transactivation of HSP1, suggesting that unique mechanisms are employed for TFAM-dependent transcription at LSP and HSP1.