Two cis-acting elements, the enhancer and the promoter,, independently contribute to the cell-specific expression of the rat insulin 1 gene. The activities of these elements are presumably mediated by trans-acting factors. We have performed intracellular competition experiments that suggest the presence of a negative factor(s) that represses the enhancer activity in cells that do not express the insulin gene.In these experiments fibroblast cells (COS-7) were transfected with two plasmids: a test plasmid containing the gene for chlorampheiiicol acetyltransferase under the control of the thymidine kinase promoter and the insulin enhancer; and a competitor plasmid containing insulin enhancer sequences and the simian virus 40 origin of replication to permit its replication in the recipient cells. The presence of the competitor plasmid led to a 5-to 6-fold -increase in chloramphenicol acetyltransferase activity as compared with the activity detected when insulin enhancer was absent from either the competitor or the test plasmid. A 5-fold increase in chloramphenicol acetyltransferase activity was also seen when the rat amylase enhancer was present on the competitor plasmid; in contrast the simian virus 40 enhancer exerted no effect. Efficient derepression required additional sequences downstream from those essential for enhancer activity. We propose that the activity ofthe rat insulin 1 enhancer is modulated by a negative tbans-acting factor(s) that is active in cells not expressing insulin but is overridden by the dominant positive trans-acting factor(s) present in insulinproducing cells.During cellular differentiation, cell types acquire the ability to stably express a characteristic set of genes. The. molecular mechanisms by which this occurs are poorly understood. Several genes whose expression is restricted to a specific subset of cells contain cis-acting sequences required for efficient transcription in the appropriate differentiated cells (1-6). We have demonstrated (7) that 5' flanking DNA sequences of the rat insulin 1 gene contain two such cellspecific elements. The properties of these elements are consistent with the hypothesis that differentiated cells contain positive trans-acting proteins (differentiators) that interact with the specific cis-acting sequences to stimulate the expression of the associated genes. This idea is also consistent with the observations and concepts of other workers (8-12). On the other hand, "extinction" of the differentiated phenotype after fusion of differentiated cells with fibroblasts is frequently observed (13). We have also noted that specific sequence deletions in the insulin gene 5' flanking sequences can lead to increases in expression in nondifferentiated cells (unpublished observations). These results are consistent with a role for repressor-like molecules in nonexpressing cells.