The human placenta has a remarkable capacity to aromatize C19-steroids, produced by the fetal adrenals, to estrogens. This reaction is catalyzed by aromatase P450 (P450arom), encoded by the CYP19 gene. In placenta, CYP19 gene expression is restricted to the syncytiotrophoblast layer. Cytotrophoblasts isolated from human placenta, when placed in monolayer culture in 20% O2, spontaneously fuse to form syncytiotrophoblast. These morphological changes are associated with a marked induction of aromatase activity and CYP19 gene expression. When cytotrophoblasts are cultured in an atmosphere containing 2% O2, they manifest increased rates of DNA synthesis and fail to fuse and form syncytiotrophoblast. The objective of the present study was to utilize cytotrophoblasts isolated from midterm human placenta to analyze the effects of O2 on CYP19 gene expression and the molecular mechanisms that mediate these effects. We observed that when trophoblast cells were maintained in 2% O2, there was only a modest induction of CYP19 expression as a function of time in culture, and aromatase activity was barely detectable. However, when cytotrophoblasts that had been maintained in 2% O2 for 3 days were placed in a 20% O2 environment, there was a rapid onset of cell fusion and induction of P450arom mRNA and aromatase activity. In addition, mRNAs for the helix-loop-helix factors Mash-2 (mammalian achaete-scute homologous protein-2) and Id1 (inhibitor of differentiation 1) were readily detectable in freshly isolated cytotrophoblasts and were markedly decreased upon differentiation to syncytiotrophoblast in 20% O2. By contrast, when cytotrophoblasts were cultured in 2% O2, mRNA levels for Mash-2 and Id1 remained elevated. Interestingly, overexpression of Mash-2 in primary cultures of human trophoblast cells markedly inhibited cell fusion and the spontaneous induction of P450arom mRNA levels and caused a marked decrease in expression of co-transfected fusion gene constructs containing either 125, 201, 246, or 501 bp of DNA flanking the 5'-end of the placenta-specific exon (exon I.1) of the human CYP19 gene linked to the human GH (hGH) structural gene, as reporter. In studies using BeWo, a human choriocarcinoma cell line, overexpression of Mash-2 also inhibited expression of cotransfected CYP19I.1:hGH fusion gene constructs. The findings that Mash-2 had no effect on the expression of a CYP19I.1(-42):hGH fusion gene in primary cultures of human trophoblast and BeWo cells suggest that Mash-2 exerts its inhibitory effects directly or indirectly though CYP19I.1 5'-flanking sequences that lie between -42 and -125 bp. By contrast, neither Id1 nor Id2 had an effect on CYP19I. 1 promoter activity in the transfected BeWo cells. These findings suggest that Mash-2 may serve as a hypoxia-induced transcription factor that prevents differentiation to syncytiotrophoblast and aromatase induction in human trophoblast cultured under low O2 conditions.