We have isolated an ecdysone-inducible gene, E74, from the early puff at position 74EF in the Drosophila polytene chromosomes. We show that E74 consists of three nested transcription units that derive from unique promoters but share a single polyadenylation site. The 60 kb E74A unit is directly induced by ecdysone and leads to the synthesis of a 6.0 kb mRNA that contains an unusually long 5' leader (1891 nucleotides) with 17 short ORFs. Within the fifth of the seven E74A introns are two E74B promoters that direct the synthesis of 4.8 and 5.1 kb mRNAs. The nested arrangement of these transcription units leads to the formation of two E74 proteins, each with a unique N-terminal domain joined to a common C-terminal domain. The unique N-terminal domains contain regions rich in acidic amino acids while the C-terminal domain is rich in basic amino acids and is very similar to proteins encoded by the ets proto-oncogene superfamily.