Glucagon, a peptide hormone which regulates hepatic carbohydrate metabolism, is processed from a larger precursor, proglucagon. The gene encoding proglucagon is expressed at high levels in the A cells of the pancreatic islets and the L cells of the intestine, indicating that specific factors present in these two phenotypically distinct cells direct cell-specific expression. To characterize the factors that mediate glucagon gene transcription, we analyzed the 5'-flanking region of the rat glucagon gene for the existence of cis-acting sequences that promote glucagon gene transcription. A series of fusion genes containing sequentially shortened 5'-flanking sequences of the rat glucagon gene were constructed and fused to the coding sequence of the reporter enzyme chloramphenicol acetyltransferase. Analyses of the transcription of these fusion genes after their transfection into choriocarcinoma cells, fibroblasts, and islet cell lines of different phenotypes indicate that cis-acting DNA elements promote glucagon gene transcription only in islet cell lines. Transcriptional activity was much higher in glucagon compared to insulin-producing islet cell lines with fusion genes containing 249 or more base pairs of glucagon 5'-flanking sequence. Deletion of DNA sequences upstream of -168 abolished the preferential expression in glucagon-producing cell lines, however glucagon-chloramphenicol acetyltransferase fusion genes containing 168 base pairs or more of 5'-flanking sequence remained transcriptionally active, but only in islet cell lines. Fusion genes containing 115 base pairs of glucagon gene 5'-flanking sequences were transcriptionally inactive. These studies indicate that cis-acting DNA sequences present in the 5'-flanking region of the rat glucagon gene mediate islet cell-specific gene transcription.