Brain-2 is a class III POU transcription factor expressed in developing nervous system. In this study, we have examined the transcriptional regulatory region of Brn-2. Expression of Brn-2 is activated when P19 embryonal carcinoma cells are induced to differentiate into neural cells with retinoic acid (RA). In P19 cells, the 0.5 kb upstream region of Brn-2 was sufficient for the transcriptional activation during RA-induced differentiation. Deletion analysis of the 0.5 kb region located a proximal enhancer (between -422 and -379 with respect to the translational initiation codon), which was essential for the activation. By gel shift assay and methylation interference assay, a specific binding factor was detected that recognized a core sequence GAGCCAAT found within the proximal enhancer. To examine whether the 0.5 kb upstream region can function in embryos, transgenic mice were generated that contained LacZ gene driven by the 0.5 kb upstream region. In these transgenic mice, LacZ was expressed in developing olfactory epithelial cells between embryonic day 12.5 and 14.5. Immunostaining with an anti-Brain-2 antibody demonstrated the expression of Brain-2 in the olfactory epithelium (most likely olfactory receptor neurons) at similar developmental stages. These results suggest that the 0.5 kb upstream region of Brn-2 is sufficient for the expression in the developing olfactory cells and that the DNA binding factor recognizing the proximal enhancer may be involved in the olfactory cell specific expression.