The Drosophila proliferating cell nuclear antigen promoter contains multiple transcriptional regulatory elements, including upstream regulatory element (URE), DNA replication-related element, E2F recognition sites, and three common regulatory factor for DNA replication and DNA replication-related element-binding factor genes recognition sites. In nuclear extracts of Drosophila embryos, we detected a protein factor, the URE-binding factor (UREF), that recognizes the nucleotide sequence 5'-AAACCAGTTGGCA located within URE. Analyses in Drosophila Kc cells and transgenic flies revealed that the UREF-binding site plays an important role in promoter activity both in cultured cells and in living flies. A yeast one-hybrid screen using URE as a bait allowed isolation of a cDNA encoding a transcription factor, Grainyhead/nuclear transcription factor-1 (GRH/NTF-1). The nucleotide sequence required for binding to GRH was indistinguishable from that for UREF detected in embryo nuclear extracts. Furthermore, a specific antibody to GRH reacted with UREF in embryo nuclear extracts. From these results we conclude that GRH is identical to UREF. Although GRH has been thought to be involved in regulation of differentiation-related genes, this study demonstrates, for the first time, involvement of a GRH-binding site in regulation of the DNA replication-related proliferating cell nuclear antigen gene.