The gene encoding the precursor protein to the hormone oxytocin and its associated neurophysin has been isolated from a rat genomic library, and its sequence has been determined. The small gene (approximately equal to 850 base pairs) predicts a mRNA of approximately equal to 500 bases [without the poly(A) tail]. The exon-intron organization is similar to that of the vasopressin gene, with two splice sites in the protein-coding region. The first exon (A) comprises the 5' noncoding promoter region, a putative signal peptide, the nonapeptide hormone oxytocin, and the NH2-terminal, variable region of neurophysin. The second exon (B) encodes the central, conserved region of neurophysin, and the third exon (C) encodes the remaining COOH terminus of neurophysin, with an additional arginine residue at its end, presumably cleaved off during post-translational processing. A stretch of 143 nucleotides within exon B, except for a single base change, is entirely homologous to the equivalent part of the rat vasopressin gene, offering support for a gene conversion event having recently affected the two genes.