The transcription factor Pax2 is essential for the development of the urogenital system. Pax2 expression can be detected by mouse embryonic day 8.5 (E8.5) in the region of intermediate mesoderm fated to become the nephric duct, pronephros, and mesonephros. Elements that direct Pax2 expression to nephrogenic precursor cells must be responding to positional information that controls nephrogenic fate. A 4.1-kb Pax2 promoter/enhancer fragment directs expression of a lacZ reporter to the nephrogenic region and the midbrain-hindbrain junction in transgenic mice. As kidney development proceeds, transgene expression is limited to the nephric duct and its derivatives, but not the metanephric mesenchyme. The early expression driven by the 4.1 promoter does not require the Pax2 protein, demonstrating that it receives positional information in the absence of a developing pro- or mesonephros. We have identified two DNAseI hypersensitive regions within this promoter, one at the start site of transcription initiation and a second approximately 2-kb upstream. Deletion of the more distal site significantly attenuates lacZ expression in the nephrogenic region but not in the midbrain-hindbrain region. DNA footprinting of this fragment revealed a highly conserved sequence between mouse and human Pax2 promoter sequences. Using fractionated nuclear extracts, we identified the transcription factor Yin Yang 1 (YY1) as the protein that binds to this conserved sequence. Deletion of the YY1 element significantly attenuated expression of a full-length 4.1 promoter. Moreover, inclusion of this YY1 binding element significantly enhanced expression of a minimal Pax2 promoter/enhancer transgene in E12 embryos. These data point to a novel role for YY1 in the establishment of high level tissue-specific expression within the intermediate mesoderm.