Little is known regarding the molecular pathways that underlie the retinal maturation process. We are studying the regulation of the retinal fatty-acid-binding protein (R-FABP) gene, highly expressed in retinal precursor cells, to identify DNA regulatory elements and transcriptional factors involved in retinal development. Although the upstream sequence of the R-FABP gene is extremely GC rich, CpG methylation in this region is not implicated in the regulation of this gene because the 5' flanking DNA remains unmethylated with tissue differentiation when there is a dramatic decrease in R-FABP transcript levels. Using a combination of DNase I hypersensitivity experiments, gel shift assays, and DNase I footprinting, we have found three sites of DNA-protein interaction within 205 bp of 5' flanking DNA in the undifferentiated retina and four sites in the differentiated retina. DNA transfection analysis indicates that the first two footprints located within 150 bp of 5' flanking DNA are required for high levels of transcription in primary undifferentiated retinal cultures. The first footprint includes a putative TATA box and Spl binding sites while the second footprint contains a consensus AP-2 DNA binding site. Supershift experiments using antibodies to AP-2 and methylation interference experiments indicate that an AP-2-like transcription factor present in both late-proliferative-stage retina and differentiated retina binds to the upstream region of the R-FABP gene. A combination of data including the expression profile of AP-2 during retinal development and DNA transfection analysis using constructs mutated at critical residues within the AP-2 binding site suggests that AP-2 is a repressor of R-FABP transcription.