Two-component signal transduction systems involving histidine autophosphorylation and phosphotransfer to an aspartate residue on a receiver molecule have only recently been discovered in eukaryotes, although they are well studied in prokaryotes. The Sln1 protein of Saccharomyces cerevisiae is a two-component regulator involved in osmotolerance. Phosphorylation of Sln1p leads to inhibition of the Hog1 mitogen-activated protein kinase osmosensing pathway. We have discovered a second function of Sln1p by identifying recessive activated alleles (designated nrp2) that regulate the essential transcription factor Mcm1. nrp2 alleles cause a 5-fold increase in the activity of an Mcm1-dependent reporter, whereas deletion of SLN1 causes a 10- fold decrease in reporter activity and a corresponding decrease in expression of Mcm1-dependent genes. In addition to activating Mcm1p, nrp2 mutants exhibit reduced phosphorylation of Hog1p and increased osmosensitivity suggesting that nrp2 mutations shift the Sln1p equilibrium toward the phosphorylated state. Two nrp2 mutations map to conserved residues in the receiver domain (P1148S and P1196L) and correspond to residues implicated in bacterial receivers to control receiver phosphorylation state. Thus, it appears that increased Sln1p phosphorylation both stimulates Mcm1p activity and diminishes signaling through the Hog1 osmosensing pathway.