Glucocorticoids are known to exert multiple effects upon neuronal systems and neuronal gene expression but the molecular mechanisms through which these effects are mediated are largely undefined. In this study, a transgenic mouse model that expresses a bovine vasopressin transgene was used to investigate the mechanisms by which this neuropeptide gene is repressed by glucocorticoids. Using both northern analysis and a reverse transcriptase polymerase chain reaction assay, depletion of glucocorticoids with the 11,beta-hydroxylase inhibitor metyrapone was shown to result in a dexamethasone-reversed increase in ectopic adrenal transgene messenger RNA levels. This result shows that sequences within the confines of the 3.5 kb transgene are sufficient to mediate repression by glucocorticoids, and indicates the involvement of a type II glucocorticoid receptor mechanism which is independent of cellular context. Evidence for the involvement of cis-acting repressive elements in the proximal 5' flanking sequence was obtained in further studies in which bovine transgene constructs were shown to be negatively regulated by dexamethasone in 293 cells. The further demonstration that recombinant glucocorticoid receptor binds to a vasopressin promoter fragment in an in vitro electrophoretic mobility shift assay provided additional evidence of a direct mechanism of repression. Both in vitro studies were consistent with the presence of a glucocorticoid regulatory element within the region -300 to 155 of the transcription start site. The use of an in vivo transgenic system combined with in vitro analyses of gene promoter fragments enabled the characterization of the molecular mechanisms which effect physiological changes in vasopressin gene expression, and provided evidence of a direct mechanism of repression mediated by sequences within the vasopressin gene promoter.