Transforming growth factor beta 3 (TGF-beta 3) has been cloned from humans, chickens, pigs, and mice. Although the specific in vivo roles of this form of TGF-beta are unknown, the pattern of embryonic and tissue-specific expression of TGF-beta 3 suggests that it is involved in embryogenesis and cell differentiation. We have cloned and sequenced the TGF-beta 3 5'-flanking region to study the transcriptional regulation of this gene. Characterization of the 5'-flanking region showed a 1104-base pair 5'-untranslated region, a TATA box 21 bp upstream from the transcription start site, and cAMP-responsive element (CRE) and AP-2 binding site consensus sequences starting at 12 and 24 bp, respectively, upstream from the TATA box. Promoter fragments were cloned into a chloramphenicol acetyltransferase reporter plasmid to study functional activity. Basal transcriptional activity of the promoter was regulated by multiple upstream elements including the CRE and the AP-2 site. The CRE was important for both basal and forskolin induction of promoter activity. The TGF-beta 3 promoter was found to be strikingly dissimilar to the TGF-beta 1 promoter. Since the TGF-beta s have activity in promoting or inhibiting proliferation and differentiation of multiple cell types, it seems likely that the differential and tissue-specific transcriptional regulation of these genes is of fundamental importance in the induction and maintenance of differentiated cell types in various tissues.