Class II transactivator (CIITA) is a master regulator required for constitutive and IFN-gamma-inducible expression of class II MHC genes. Although the role of CIITA is greatly appreciated, the mechanisms underlying constitutive and IFN-gamma-induced expression of CIITA are not understood. The study of CIITA induction is extremely important, but has been fraught with difficulty. This study describes for the first time a large (7-kb) fragment of 5' flanking sequences that mediates the B cell-specific, IFN-gamma-induced, and TGF-beta-suppressed expression of CIITA. This pattern of expression matches the authentic expression of the endogenous gene. Within the 7-kb fragment, sequences that lie between nucleotides -545 and -113 relative to the transcriptional start site are critical for constitutive promoter expression in B cells. In contrast, inducible activation of CIITA by IFN-gamma requires sequences contained in an additional 4 kb of upstream DNA. This region mediates an IFN-gamma response when linked to either the endogenous CIITA promoter or a heterologous promoter. A role for STAT1 in regulation of the CIITA promoter is shown by the rescue of IFN-gamma induction by expression of STAT1 in STAT1-defective U3A cells. TGF-beta significantly inhibits IFN-gamma-mediated induction of the CIITA promoter in 2fTGH fibroblasts, which indicates that the promoter is a target for TGF-beta. This inhibition is achieved by suppression of the basal promoter. This study provides a focal point for understanding the mechanism of B cell-specific, IFN-gamma-induced, and TGF-beta-suppressed expression of CIITA.