In the Arc repressor dimer, the side chains of Ile37 and Val41 in alpha-helix B pack against each other and against the symmetry-related side chains of Ile37' and Val41' in alpha-helix B' to form part of the hydrophobic core and the dimer interface. Following combinatorial mutagenesis of these positions, only the wild-type combination of hydrophobic residues was recovered as a fully active protein, and only a few conservative replacements were recovered as stably folded or partially active proteins. Equilibrium and kinetic studies of the folding of purified mutants show that the delta-CH3 groups of Ile37 and Ile37' contribute approximately 2 kcal/mol of dimer to protein stability and are involved in interactions that are only partially formed in the transition state for protein folding. Alanine substitution at either position 37 or 41 results in proteins which differ from wild type in being monomeric at a concentration of 10 microM, having reduced secondary structure, having solvent-exposed tryptophans, and showing non-cooperative thermal and urea denaturation transitions. These mutants appear to exist in a physiologically denatured state that is similar in many ways to the molten globule state.