Keratinocyte growth factor (KGF), a member of the fibroblast growth factor family of related proteins, is expressed by stromal fibroblasts and acts on epithelial cells in a paracrine fashion. To understand the mechanisms responsible for regulating normal KGF expression and how these might be altered in disease, the 5'-flanking region of this gene was cloned. The presence of two KGF transcription initiation sites was suggested by ribonuclease protection assay and confirmed by primer extension analysis. Examination of the genomic DNA sequence revealed the presence of the putative promoter sequences TATTTA and CCAAT, located 31 and 50 base pairs upstream, respectively, from the first of the two mRNA start points, and putative initiator sequences surrounding each transcription start site. Transient transfection into murine NIH/3T3 fibroblasts demonstrated that the region required for basal level KGF promoter activity was located between bases -225 and +190. Inclusion of sequences between -1503 and -775 markedly reduced promoter activation, indicating the presence of negative regulatory element(s) in this region. A similar pattern of promoter activation was detected in human fibroblasts and in murine C2C12 myoblasts. In contrast, no chloramphenicol acetyltransferase activity was observed in macrophages and epithelial and lymphoid cells transfected with the same constructs. Northern blot analysis revealed a strong correlation between KGF RNA expression and promoter activation in all cells tested. Activation of the KGF promoter could be induced by the proinflammatory cytokines interleukin 1 and interleukin 6 and by the adenylate cyclase activator forskolin. Taken together, these results indicate the existence of cis-acting element(s) responsible for selective activation of the KGF promoter only in cells that express KGF mRNA and may provide a mechanistic basis for KGF gene expression during inflammation.