The proximal promoter of the kallikrein-related peptidase 3 gene (KLK3/PSA) contains a single-nucleotide polymorphism (G-158A) located within the second canonical half-site for the prostate-specific antigen (PSA) androgen response element 1 (AREI). Previous studies suggest that this polymorphism may be associated with higher PSA levels and increase prostate cancer risk. We have investigated the potential functional significance of this polymorphism and its association with prostate cancer susceptibility by genotyping the G-158A polymorphism in 209 men diagnosed with prostate cancer and 223 healthy control men in an Australian Caucasian population. Functional analyses of PSA AREI demonstrated that the A allele increased binding of AREI to the androgen receptor, as well as increasing transcriptional response to androgens. Association studies of the G-158A polymorphism demonstrated that men with an A/A genotype had a 3-fold increased risk for developing prostate cancer [95% confidence intervals (CIs) = 1.36-6.52] and men with an A/G genotype had a 2.4-fold increased risk (95% CIs = 1.23-4.81). Under a dominant model, the A allele conferred a 2.6-fold increased risk for prostate cancer (95% CIs = 1.37-4.96, P = 0.004). Taken together with the finding that the G-158A polymorphism is associated with an increased risk of prostate cancer in Australian men, our functional data suggest that the presence of the A allele in AREI may, in part, account for the altered PSA regulation seen in prostate cancer.