Previous studies of epidermal-specific gene promoters suggested that a limited set of transcription factors regulate keratinocyte-specific and differentiation-specific gene expression in the epidermis. In the present study, we investigated the functional importance of AP-1- and Sp1-binding elements in the determination of cell type-specific and differentiation-specific gene expression by transient transfection into undifferentiated and differentiated keratinocytes as well as into various non-epidermal cell lines. Synthesized short AP-1- and/or Sp1-binding elements were inserted into a minimal reporter vector, and the artificial promoter containing both AP-1 and Sp1 elements showed high levels of transcriptional activity only when transfected into differentiated keratinocytes. Promoters containing either the AP-1 or the Sp1 motif alone showed little activity in any of the cells examined. We also found that close proximity of the Sp1 and AP-1 sites is essential for transcriptional activity, suggesting that the physical interaction between Sp1 and AP-1 factors is important for functional activity. These results clearly demonstrate that the combination of ubiquitously expressed transcription factors AP-1 and Sp1 confers keratinocyte specificity and differentiation specificity on the gene expression. Our findings also provide a simple model of the mechanisms underlying regulation of cell type-specific and cell differentiation-specific gene expression by ubiquitously expressed transcription factors.