The cell cycle arrest and proapoptotic functions of p53 are under tight control by Mdm2. After stress activation of p53 by nontranscriptional mechanisms, transcription of the mdm2 gene results in increased synthesis of Mdm2 and down-regulation of p53. Disruption of this autoregulatory loop has profound effects on cell survival and tumorigenesis. We show that a defective p53-Mdm2 autoregulatory loop results from inactivation of a basal transcription factor, TAF_II250, in tsBN462 cells. We found that Mdm2 expression rescues the temperature-sensitive phenotype of tsBN462 cells, as shown by activation of cell cycle-regulated gene promoters (B-myb, cyclin A, and cdc25C), increased cell growth and DNA synthesis, and inhibition of apoptosis. These effects of Mdm2 are mediated by p53. Exogenous Mdm2 expression apparently complements endogenous Mdm2 synthesis in tsBN462 cells, which is reduced compared to that in the equivalent parental cells with wild-type TAF_II250, BHK21. Expression of wild-type TAF_II250 in tsBN462 stimulates and prolongs the synthesis of Mdm2 and rescues the temperature-sensitive phenotype. The TAF_II250 rescue is blocked by inhibition of Mdm2-p53 interactions. We also show that Mdm2 promoter activation, after transfer to the nonpermissive temperature, is attenuated in cells with mutant TAF_II250. The temperature-sensitive phenotype apparently results from inefficient inhibition of heat-induced p53 by reduced Mdm2 synthesis due to low mdm2 promoter activity. These results raise the possibility that the p53-Mdm2 autoregulatory loop could guard against transcriptional defects in cells.