The expression of type I collagen is regulated developmentally and tissue specifically. Two sets of binding sites for nuclear factor I (NF-I) and Sp1 transcription factors arrayed as an imperfect tandem repeat are critical for high activity of the murine alpha-1(I) collagen gene in NIH-3T3 fibroblasts and are conserved in evolution. Gel retardation analysis combined with methylation interference studies show that NF-I and Sp1 bind to overlapping sites in a mutually exclusive manner. Cotransfection studies using Drosophila Schneider L2 cells, which lack both transcription factors, demonstrate that each factor alone trans-activates the gene, while cotransfection of both factors results in the inhibition of the strong Sp1 trans-activation. In contrast, the herpes simplex virus thymidine kinase promoter, which contains functionally independent NF-I and Sp1 binding sites, is maximally transactivated by the cotransfection of both factors. Because the two NF-I/Sp1 binding sites overlap, the ratio of the activities of the two factors rather than their absolute concentrations determine alpha-1(I) gene expression, characterizing these promoter sequences as transcription factor switch elements.