Maturity onset diabetes of the young, subtype 1 (MODY1), is associated with defective glucose-dependent insulin secretion from pancreatic beta cells. MODY1 is caused by mutation in the transcription factor hepatocyte nuclear factor 4 alpha (HNF4 alpha). To understand better the MODY1 phenotype, we tested whether HNF4 alpha was able to modulate directly the insulin gene promoter. Transfection of cultured 293T cells with an HNF4 alpha expression vector led to 10-fold activation of a cotransfected reporter plasmid containing the rat insulin I gene promoter. Computer analysis revealed a potential HNF4 alpha-binding site between nucleotides -57 and -69 of the promoter; mutation of this sequence led to reduced ability of HNF4 alpha to activate the promoter. The ability of HNF4 alpha to bind this sequence was confirmed using gel shift analysis. In transfected INS-1 beta cells, mutation of either the HNF1 alpha site or the HNF4 alpha site in the insulin gene promoter led to 50-75% reduction in reporter gene activity; expression of dominant negative HNF4 alpha led to significant reduction in the activity of wild type and both mutated promoters. Thus, in addition to the previously described indirect action of HNF4 alpha on insulin gene expression mediated through elevated HNF1 alpha levels, HNF4 alpha also activates the insulin gene directly, through a previously unrecognized cis element.