The CCAAT/enhancer-binding proteins (C/EBPs) are basic leucine zipper transcription factors that play important roles in regulating cell growth and differentiation. C/EBP proteins form leucine zipper-mediated homodimers but are also capable of heterodimerizing with other C/EBPs in vitro. Here we show that C/EBPbeta occurs predominantly as a heterodimer that displays rapid mobility in gel shift assays. Biochemical fractionation and antibody supershift assays demonstrate that the C/EBPbeta heterodimeric partner is C/EBPgamma (Ig/EBP), a C/EBP protein that has been implicated as an inhibitor of other family members. Although most cell types express C/EBPbeta.C/EBPgamma heterodimers, macrophages contain a C/EBPbeta partner that is serologically distinct from C/EBPgamma. We found that C/EBPgamma blocked the ability of C/EBPbeta and C/EBPgamma to activate a reporter gene in L cell fibroblasts but did not inhibit a chimeric C/EBPbeta protein containing the GCN4 leucine zipper. Repression by C/EBPgamma occurs at the level of transactivation and requires heterodimerization with the C/EBP partner. C/EBPgamma was an ineffective repressor in HepG2 hepatoma cells despite forming C/EBP heterodimers, and C/EBPalpha was not effectively inhibited in either L or HepG2 cells. Our findings demonstrate that C/EBPgamma modulates C/EBP activity in a cell- and isoform-specific manner.