The RAD25 gene of Saccharomyces cerevisiae functions in nucleotide excision repair of ultraviolet-damaged DNA and is also required for cell viability. The RAD25 protein shows remarkable homology to the protein encoded by the human nucleotide-excision-repair gene XPB (ERCC3), mutations in which cause the cancer-prone disease xeroderma pigmentosum and also Cockayne's syndrome. Here we purify RAD25 protein from S. cerevisiae and show that it contains single-stranded DNA-dependent ATPase and DNA helicase activities. Extract from the conditional lethal mutant rad25-ts24 exhibits a thermolabile transcriptional defect which can be corrected by the addition of RAD25 protein, indicating a direct and essential role of RAD25 in RNA polymerase II transcription. The protein encoded by the rad25799am allele is defective in DNA repair but is proficient in RNA polymerase II transcription, indicating that RAD25 DNA-repair activity is separable from its transcription function. The rad25 Arg-392 encoded product, which contains a mutation in the ATP-binding motif, is defective in RNA polymerase II transcription, suggesting that the RAD25-encoded DNA helicase functions in DNA duplex opening during transcription initiation.