Aldehyde dehydrogenase (ALDH1) is highly expressed in the dorsal cells of the undifferentiated retina, where it has been proposed to play a role in the formation of a retinoic acid gradient along the ventrodorsal axis. In contrast to the retina, ALDH1 levels increase with differentiation in the liver and remain elevated in the adult tissue. To understand the molecular basis for differential expression of ALDH1 during development, we characterized the ALDH1 transcripts expressed in chick retina and liver. By sequencing, primer extension, and S1 nuclease analysis, we show that retina ALDH1 mRNA has an additional 300 nucleotides of 5'-untranslated sequence resulting from the transcription of two 5' noncoding exons. There is a 24-29-kilobase pair (kb) gap between exons 1 and 2 and a 290-base pair gap between exons 2 and 3. Exon 3, which contains the ALDH1 start codon, represents the first exon of the liver transcript. Using a reporter gene assay, we have identified tissue-specific regulatory elements that govern ALDH1 expression in primary retina and liver cultures. Constructs with >1.6 kb of DNA flanking the 5'-end of exon 1 showed elevated activity in retinal cultures but only basal activity in liver cultures. In contrast, constructs with <1 kb of 5'-flanking DNA were active in both retina and liver cultures. Our results suggest that an important mechanism for the control of ALDH1 transcriptional activity is through the presence of inhibitory elements located 0.7-1.6 kb upstream of the ALDH1 gene. DNase I footprint analysis reveal four sites of protein-DNA interaction within this region, one of which is specific to the liver and corresponds to a NF-kappaB/Rel binding site.