B2 genes are rodent-specific middle repetitive elements transcribed by RNA polymerase III. They are expressed in the ectoderm and mesoderm but not in the embryonic or extraembryonic endoderm of early mouse embryos. This tissue specificity is mimicked in vitro by embryonal carcinoma and embryonic stem cell lines. Nuclear run-on experiments show that the down-regulation of B2 genes during F9 embryonal carcinoma cell differentiation into endoderm occurs at the transcriptional level and that other class III genes, including those encoding tRNA, show a similar response. We have used cell-free extracts to investigate the molecular mechanisms responsible. The specific down-regulation of transcription by RNA polymerase III during F9 cell differentiation is due to a reduction in the activity of the general class III transcription factor TFIIIB.