Pancreas duodenum homeobox 1 (PDX-1) is absolutely required for pancreas development and the maintenance of islet beta-cell function. Temporal and cell-type-specific transcription of the pdx-1 gene is controlled by factors acting upon sequences found within its 5'-flanking region. Critical cis-acting transcriptional control elements are located within a nuclease hypersensitive site that contains three conserved subdomains, termed areas I, II, and III. We show that area II acts as a tissue-specific regulatory region of the pdx-1 gene, directing transgene expression to a subpopulation of islet cells. Mutation of the area II hepatocyte nuclear factor 3 (HNF3) binding element in the larger area I- and area II- containing PstBst fragment also decreases PB(hsplacZ) transgene penetrance. These two results indicate possible ontogenetic and/or functional heterogeneity of the beta-cell population. Several other potential positive- and negative-acting control elements were identified in area II after mutation of the highly conserved sequence blocks within this subdomain. Pax6, a factor essential for islet alpha-cell development and islet hormone gene expression, was shown to bind in area II in vitro. Pax6 and HNF3 beta were also found to bind to this region in vivo by using the chromatin immunoprecipitation assay. Collectively, these data suggest an important role for both HNF3 beta and Pax6 in regulating pdx-1 expression in beta cells.