The KNR4 gene, originally isolated by complementation of a K9 killer-toxin-resistant mutant displaying reduced levels of both 1,3-beta-glucan and 1,3-beta-glucan synthase activity, was recloned from a YCp50 genomic library as a suppressor of Saccharomyces cerevisiae calcofluor-white-hypersensitive (cwh) mutants. In these mutants, which were characterized by increased chitin levels, the suppressor effect of KNR4 resulted, for some of them, in a lowering of polymer content to close to wild-type level, with no effect on the contents of beta-glucan and mannan. In all cases, this effect was accompanied by a strong reduction in mRNA levels corresponding to CHS1, CHS2 and CHS3, encoding chitin synthases, without affecting expression of FKS1 and RHO1, two genes encoding the catalytic subunit and a regulatory component of 1,3-beta-glucan synthase, respectively. Overexpression of KNR4 also inhibited expression of CHS genes in wild-type strains and in two other cwh mutants, whose sensitivity to calcofluor white was not suppressed by this gene. The physiological relevance of the KNR4 transcriptional effect was addressed in two different ways. In a wild-type strain exposed to alpha-factor, overexpression of this gene inhibited CHS1 induction and delayed shmoo formation, two events which are triggered in response to the pheromone, whereas it did not affect bud formation and cell growth in a chs1 chs2 double mutant. A chimeric protein made by fusing green fluorescent protein to the C terminus of Knr4p which fully complemented a knr4delta mutation was found to localize in patches at presumptive bud sites in unbudded cells and at the incipient bud site during bud emergence. Taken together, these results demonstrate that KNR4 has a regulatory role in chitin deposition and in cell wall assembly. A mechanism by which this gene affects expression of CHS genes is proposed.