C-proteins control restriction-modification (R-M) systems' genes transcription to ensure sufficient levels of restriction endonuclease to allow protection from foreign DNA while avoiding itsmodification by excess methyltransferase. Here, we characterize transcription regulation in C-protein dependent R-M system Kpn2I. The Kpn2I restriction endonuclease gene is transcribed from a constitutive, weak promoter, which, atypically, is C-protein independent. Kpn2I C-protein (C.Kpn2I) binds upstream of the strong methyltransferase gene promoter and inhibits it, likely by preventing the interaction of the RNA polymerase sigma subunit with the-35 consensus element. Diminished transcription from the methyltransferase promoter increases transcription from overlapping divergent C-protein gene promoters. All known C-proteins affect transcription initiation from R-M genes promoters. Uniquely, the C.Kpn2I binding site is located within the coding region of its gene. C.Kpn2I acts as a roadblock stalling elongating RNA polymerase and decreasing production of full-length C.Kpn2I mRNA. Mathematical modeling shows that this unusual mode of regulation leads to the same dynamics of accumulation of R-M gene transcripts as observed in systems where C-proteins act at transcription initiation stage only. Bioinformatics analyses suggest that transcription regulation through binding of C.Kpn2I-like proteins within the coding regions of their genes may be widespread.