The gene encoding proopiomelanocortin(POMC) offers an interesting model for negative regulation of gene transcription by glucocorticoids. A fragment of human genomic DNA containing the entire POMC gene, together with the neo marker gene, was introduced by transfection into the ACTH-producing mouse pituitary tumor cell line, AtT-20, and the mouse fibroblast L cell line. In the transformed AtT-20 cells the human POMC gene was transcribed correctly and the transcript was spliced faithfully. Furthermore, the addition of dexamethasone to the transformed AtT-20 cells resulted in a 40% reduction of the human POMC mRNA levels. Deletion analysis demonstrated that no more than 417 bp in the 5'-flanking region of the human POMC gene are required for transcriptional repression by glucocorticoid. This region was also responsible for the transcription induction of the human POMC gene by cyclic AMP (cAMP). In the transformed L cells, however, most of the transcripts of the human POMC gene were not correctly initiated. The addition of dexamethasone to the transformed L cells did not significantly affect the content of human POMC mRNA, although these cells expressed glucocorticoid receptor(GR). However, the increase of the transcripts by forskolin, a post-receptor adenylate cyclase-activating agent, was partially but significantly suppressed by dexamethasone in the transformed L cells. These results suggest that binding of GR to the negative glucocorticoid response element (nGRE) could lead to steric occlusion of positive transcription factors, such as cAMP-response element binding protein and tissue specific factors or that GR bound to nGRE could interact with DNA-bound positive factors in such a way as to prevent their transcriptional stimulatory activity.