The gene encoding rat somatostatin has been isolated from a lambda phage gene library. Phage harboring the gene were identified by plaque hybridization using a nick-translated fragment derived from the cDNA for rat somatostatin. The transcriptional unit includes exons of 238 and 367 base pairs (bp) separated by one intron of 621 bp. The intron is located between the codons for Gln (-57) and Glu (-56) of prosomatostatin. Analysis of the nucleotide sequence 5' to the start of transcription reveals a number of sequences which may be involved in the expression of somatostatin. A variant of the "TATA" box, TTTAAA, lies 26 bp upstream from the start of transcription, and a sequence homologous to the "CAAT" box (GGCTAAT) is 92 bp upstream from the transcription start. A long alternating purine-pyrimidine stretch, (GT)25, which is similar to Z DNA-forming sequences in other genes, lies 628 bp 5' to the transcription start and is flanked by small repeats. Hybridization analysis shows that this region is highly repeated in the genome and that homologous sequences are located approximately 2 kilobase pairs downstream from the poly(A) addition site. Southern hybridization of the lambda clone with probes derived from brain or liver poly(A+) RNA demonstrates that another transcribed sequence lies about 7 kilobase pairs downstream from the poly(A) addition site of the rat somatostatin gene. Analysis of rat DNA suggests that there may be restriction-site polymorphisms in or near the gene or that additional somatostatin-hybridizing sequences may exist in the genome.