Pancreatic expression of the glucagon gene depends on multiple transcription factors interacting with at least three DNA control elements: G(1), the upstream promoter element, and G(2) and G(3), two enhancer-like sequences. We report here that the major enhancer of the rat glucagon gene, G(2), interacts with three protein complexes, A(1), A(2), and A(3). A(2) is detected only in islet cells, and impairment of its binding to mutant G(2) causes a marked decrease in transcriptional activity. We identify A(1) as hepatocyte nuclear factor 3 beta (HNF-3 beta), a member of the HNF-3 DNA-binding protein family found in abundance in the liver which has been proposed to play a role in the formation of gut-related organs. HNF-3 beta binds G(2) on a site which overlaps A(2) and acts as a repressor of glucagon gene expression, as demonstrated by mutational analyses of G(2) and by cotransfection of HNF-3 beta cDNA along with reporter genes containing G(2) into glucagon-producing cells. Our data implicate HNF-3 beta in the control of glucagon gene expression and strengthen the idea of endodermal origin of the islet cells.