The transcription factor Sp1 plays an important regulatory role in transactivation of the lung type I cell differentiation gene T1alpha. Like other lung cells, type I cells may encounter changes in oxygen concentration during the lifetime of the organism. We found that exposure of mice to hyperoxia rapidly increases expression of T1alpha and other type I cell genes, and that returning the mice to normoxia quickly decreases expression. Likewise hyperoxia increases both endogenous T1alpha expression in lung epithelial cell lines and transcription of luciferase (Luc) from T1alpha promoter deletion constructs. Using wild-type promoter fragments and gel shift assays, we determined that Sp1/Sp3 and a key Sp cis-element in the proximal promoter mediate the hyperoxic response. Mutations of this element and inhibition of Sp-DNA binding by mithramycin block the hyperoxic response. Western analyses of cell homogenates show that the overall abundance of Sp1 and Sp3 proteins is not altered by hyperoxia. However, the abundance of nuclear Sp1 increases after short hyperoxic exposures, suggesting that signaling pathways activated by hyperoxia lead to Sp protein translocation, perhaps as a result of increased Sp phosphorylation.