Glucagon gene expression is controlled by at least four DNA elements within the promoter; G2, G3, and G4 confer islet-specific expression, while G1 restricts glucagon transcription to alpha cells. Two islet-specific complexes are formed on G3, the insulin-responsive element of the glucagon gene; one of these corresponds to the paired homeodomain protein Pax-6, a major glucagon gene transactivator that plays a crucial role in alpha cell development. We describe here the identification of the second complex as Pax-2, another member of the paired box family. Pax-2 is known to be crucial for the development of the urogenital tract and of the central nervous system, but its presence in the endocrine pancreas has not been reported. We detected Pax-2 gene expression by RT-PCR; in islets, Pax-2 is present as two alternative splicing isoforms, Pax-2A and Pax-2B, whereas in the glucagon- and insulin-producing cell lines alphaTC1 and Min6, a distinct isoform, Pax-2D2, is found in addition to Pax-2B. Both islet-specific isoforms bind to the enhancer element G3 and to the alpha-specific promoter element G1 that also interacts with Pax-6. Pax-2A and Pax-2B dose-dependently activate transcription from the G3 and the G1 elements both in heterologous and in glucagon-producing cells. Our data indicate that Pax-2 is the third paired domain protein present in the endocrine pancreas and that one of its roles may be the regulation of glucagon gene expression.