The N=4 gauged SU(2)×SU(1,1) supergravity in four-dimensional Euclidean space is obtained via a consistent dimensional reduction of the N=1, D=10 supergravity on S × AdS3. The dilaton potential in the theory is proportional to the difference of the two gauge coupling constants, which is due to the opposite signs of the curvatures of S and AdS3. As a result, the potential can be positive, negati...