Regulation of gene expression by a transcription factor requires physical interaction between the factor and the DNA, which can be described by a statistical mechanical model. Based on this model, we developed the MatrixREDUCE algorithm, which uses genome-wide occupancy data for a transcription factor (e.g. ChIP-chip) and associated nucleotide sequences to discover the sequence-specific binding affinity of the transcription factor. Advantages of our approach are that the information for all probes on the microarray is efficiently utilized because there is no need to delineate bound and unbound sequences, and that, unlike information content-based methods, it does not require a background sequence model.