The homeobox gene Pdx-1 plays a key role in the development of the pancreas. In the adult, however, expression of the Pdx-1 gene is restricted to pancreatic β-cells and endocrine cells of duodenal epithelium. Recently, the transcription factor, upstream stimulatory factor (USF), has been shown to bind invitro to a mutationally sensitive E-box motif within the 5′-flanking region of the Pdx-1 gene [Sharma, Leonard, Lee, Chapman, Leiter and Montminy (1996) J. Biol. Chem. 271, 2294-2299]. In the present study, we show that USF not only binds to the Pdx-1 gene promoter but also functionally regulates the expression of the Pdx-1 gene in differentiated pancreatic β-cells. Adenovirus-mediated overexpression of a dominant negative form of USF2 decreased binding of endogenous USF to the E-box element by ~ 90%. This reduction in endogenous USF binding led to a greater than 50% decrease in Pdx-1 gene promoter activity, which, in turn, resulted in marked reductions in Pdx-1 mRNA and protein levels. Importantly, the lower Pdx-1 protein levels led to a greater than 50% reduction in Pdx-1 binding activity to the A3 element on the insulin gene promoter, and a significant reduction in insulin mRNA levels. Overall, our results show that USF functionally regulates Pdx-1 gene expression in differentiated pancreatic β-cells and provide the first functional data for a role of USF in the regulation of a normal cellular gene.