The steroid hormone 20-hydroxyecdysone controls both induction and repression of the Drosophila 'intermolt gene' Sgs-4. We show here that the ecdysone receptor binds to two sites, element I and element II, in the regulatory region of Sgs-4. A functional analysis revealed that element II appears to be of no importance for Sgs-4 expression, while element I proved to be an ecdysone response element that is necessary, but not sufficient, for induction of Sgs-4 expression. Our results provide no evidence that repression of Sgs-4 expression is mediated by one of the two receptor binding sites. In the close vicinity of elements I and II, we detected two binding sites of secretion enhancer binding protein 3 (SEBP 3). Like receptor element I, one of these sites also proved to be necessary, but not sufficient, for expression of Sgs-4. Therefore, induction of Sgs-4 requires binding of both ecdysone receptor and SEBP 3 to a complex hormone response unit, which also contains binding sites for a third factor, SEBP 2. The SEBP 2 sites coincide with binding sites of products of the Broad-Complex locus, which has been implicated recently with transduction of the hormonal signal. Thus, the available data suggest that induction of Sgs-4, and possibly other 'intermolt genes', is a combination of a primary and a secondary response to the hormone.