We have shown previously that 48 base pairs (bp) of 5'-flanking sequence are necessary for correct initiation at the major transcriptional start site of the Chinese hamster dihydrofolate reductase (dhfr) gene (Ciudad et al., 1988). As an upstream element, this sequence alone confers 25% of maximum promoter activity. The 5' half of this sequence is particularly well conserved among mammalian species; it contains one Sp1 binding site (GC box) and one CAA element. In the present work, we have analyzed the role of this region by extensive point mutational analysis. Twenty-three dhfr minigene constructs containing 1- or 2-base substitutions in this region of the promoter were tested by measuring their ability to transfect DHFR-deficient Chinese hamster ovary cells to a DHFR+ growth phenotype. Eight mutants, all in or near the GC box, exhibited reduced transfection efficiency. Promoter disfunction in these mutants was confirmed by RNase protection analysis of stable transfectants. Gel retardation experiments showed that mutants affected in the consensus sequence for Sp1 binding were deficient in binding a protein found in nuclear extracts of Chinese hamster ovary cells. Purified human transcription factor Sp1 was also unable to bind a promoter sequence bearing one of these single base substitutions, suggesting that Sp1 itself is involved in dhfr transcription in vivo. We conclude that most single base mutations in the GC box severely cripple or eliminate promoter function by inhibiting binding of transcription factors to this regulatory sequence and that Sp1 is likely to be involved in dhfr transcription in vivo. We also found that the well conserved CAA element is not absolutely necessary for transcription.