The signal transduction pathways that lead to gene induction are being intensively investigated in Dictyostelium discoideum. We have identified by deletion and transformation analysis a sequence element necessary for induction of a gene coding for uridine diphosphoglucose pyrophosphorylase (UDPGP1) of D. discoideum in response to extracellular cyclic AMP (cAMP). This regulatory element is located 380 base pairs upstream of the transcription start site and contains a G+C-rich partially palindromic sequence. It is not required for transcription per se but is required for induction of the gene in response to the stimulus of extracellular cAMP. The cAMP response sequence is also required for induction of the gene during normal development. A second A+T-rich cis-acting region located immediately downstream of the cAMP response sequence appears to be essential for the basal level of expression of the UDPGP1 gene. The position of the cAMP response element coincides with a DNase I-hypersensitive site that is observed when the UDPGP1 gene is actively transcribed.