Transforming growth factor beta (TGF-beta) is the name of a group of closely related polypeptides characterized by a multiplicity of effects, including regulation of extracellular proteolysis and turnover of the extracellular matrix. Its cellular mechanism of action is largely unknown. TGF-beta 1 is a strong and fast inducer of type 1 plasminogen activator inhibitor gene transcription. We have identified a TGF-beta 1-responsive element in the 5'-flanking region of the human type 1 plasminogen activator inhibitor gene and shown that it is functional both in its natural context and when fused to a heterologous nonresponsive promoter. Footprinting and gel retardation experiments showed that two different nuclear factors, present in extracts from both TGF-beta 1-treated and nontreated cells, bind to adjacent sequences contained in the responsive unit. A palindromic sequence binds a trans-acting factor(s) of the CCAAT-binding transcription factor-nuclear factor I family. A partially overlapping dyad symmetry interacts with a second protein that much evidence indicates to be USF. USF is a transactivator belonging to the basic helix-loop-helix family of transcription factors. Mutations which abolish the binding of either CCAAT-binding transcription factor-nuclear factor I or USF result in reduction of transcriptional activation upon exposure to TGF-beta 1, thus showing that both elements of the unit are necessary for the TGF-beta 1 response. We discuss the possible relationship of these findings to the complexity of the TGF-beta action.