We present evidence for the existence of prolactin upstream factor I (PUF-I) in rat pituitary-derived cells and demonstrate its interaction with a symmetrical DNA element located in the 5' flanking region of the gene. An in vitro expression system developed from pituitary-derived Gil3 cells was used to determine that 420 base pairs (bp) of 5' flanking DNA was sufficient for cell-specific, accurate, and efficient RNA polymerase II transcription of the rat prolactin gene. Reconstitution of in vitro transcription with pituitary and nonpituitary nuclear extracts suggested that the presence of GH3 cell-specific factors mediated the activation of prolactin gene expression. We also demonstrated that a functionally stable transcription complex assembled on the prolactin promoter. Using DNase I protection procedures, we have identified the DNA-protein binding area in the prolactin 5' flanking region. Gil3 nuclear extracts contain a cell-specific protein (PUF-I) that binds to a 28.bp region (-63 to -36) which contains an 18-bp imperfect palindrome (-63 to -46). The role that the interaction between PUF-I and the imperfect palindrome plays in in vitro pituitary-specific prolactin gene expression is discussed.The prolactin gene is expressed primarily in mammalian pituitary lactotrophs and is regulated by inhibitory and stimulatory hormones from the brain and gonads (6) plus several other classes of factors including Ca2+ (12), phorbol esters (22), and cyclic AMP (16). Previous studies have suggested that most of these factors modulate prolactin production at the level of gene transcription (2,15,16,19,21). Regulation of gene activity is presumably mediated by the interaction of cis-acting promoter elements with transacting nuclear protein transcription factors (8). The 5' flanking prolactin DNA contains homologous sequences for several eucaryotic cis control elements including two TATA boxes at positions -28 to -23 and -142 to -136 and a CAAAT sequence from -192 to -187. In addition, there is an interesting A+T-rich 18-base-pair (bp) imperfect symmetrical sequence from -63 to -46 (4, 17).An investigation of the prolactin cis-acting elements by Nelson et al. (20), using gene transfer methods, suggested the presence of two discrete, separable sequences which act in a position and orientation independent manner to enhance prolactin gene transcription. It was proposed that these two regions (from -1768 to -1712 and from -1653 to -1531) are cell-specific enhancer elements which mediate the activation of these genes in lactotrophs and somatotrophs.We have used a different approach to study the interaction of cis-acting DNA sequences and trans-acting elements leading to an activated rat prolactin gene. Cell-free nuclear extracts prepared from a rat pituitary-derived cell line, GH3, and nonpituitary cells were used to study the cell-specific in vitro transcription and DNA protein-binding interactions of the prolactin gene. We combined transcriptional and binding assays to identify DNA sequences upstream from the prolactin gene whic...