The developmental regulation of the alpha-fetoprotein (AFP) gene in liver results in high-level expression in the fetus, followed by dramatic transcriptional repression after birth. We have examined the mouse AFP gene for transcriptional control sequences that may be involved in its postnatal repression in liver. We showed previously that removal of a DNA region between positions -250 base pairs (bp) and -838 bp of the AFP gene resulted in the persistence of expression of an AFP minigene in the postpartum liver of transgenic mice (Vacher and Tilghman, Science 250:1732-1735, 1990). This study examines the distribution of these transgene transcripts in liver using in situ hybridization. We show that there is a zonal distribution of minigene transcripts in the adult livers of these animals. Hepatocytes surrounding the central veins express high levels of minigene transcripts, while hepatocytes in the intermediate and portal areas contain few, if any, transcripts. Quantitative RNAse protection analysis shows a decrease in transgene RNA levels after birth, consistent with repression in all but a small subset of hepatocytes. These results indicate that repression in the pericentral hepatocytes is dependent upon the presence of a cis-acting, negative-regulatory domain, which is located between the enhancers and the proximal promoter of the AFP gene. In contrast, this domain is not essential for complete repression of AFP transgenes in the intermediate zone and periportal hepatocytes.