We have characterized genomic and cDNA clones for arg-2, the gene encoding the small subunit of the Neurospora crassa arginine-specific carbamoyl phosphate synthetase (CPS-A), and examined its transcriptional regulation. The polypeptide's predicted amino acid sequence (453 residues) is 56% and 36% identical with the sequences of the homologous polypeptides of Saccharomyces cerevisiae and Escherichia coli, respectively. The ARG2 polypeptide has an additional amino-terminal domain with the hallmark features of a mitochondrial signal sequence. The arg-2 mRNA also encodes a 24-residue peptide in the segment upstream of the coding region for the ARG2 polypeptide. This upstream open reading frame (uORF) strongly resembles the uORF in the homologous S. cerevisiae transcript. Northern analyses indicate that arg-2 mRNA levels are reduced by arginine supplementation and increased by amino acid limitation. The large increase in arg-2 mRNA levels that occurs in response to amino acid limitation is not observed in a strain containing the cpc-1 mutation, indicating that the cross-pathway control system participates in arg-2 regulation. Four copies of the sequence TGACTC, the binding site for the CPC1 regulatory protein, are found in the arg-2 genetic region. Two copies are located upstream of the mRNA start sites, and two are present within introns in the arg-2 uORF.