Genes specifically expressed in the parasitic yeast phase of Histoplasma capsulatum have been cloned to clarify the mechanisms underlying both pathogenesis and morphogenesis in this human dimorphic fungal pathogen. Previous studies have determined that the yeast-phase-specific gene, yps-3, is expressed differentially in two non-isogenic strains which differ in their thermotolerance and virulence. We have cloned the yps-3 homologues from the high virulence (G217B) and low virulence (Downs) strains, and obtained a partial cDNA clone representing the expressed gene from H. capsulatum G217B. The Downs clone harbours a 287 bp insertion sequence that disrupts a long ORF defined by the yps-3 G217B cDNA. Although the insertion sequence contains features reminiscent of mobile genetic elements, including 15 bp direct repeats of flanking sequence, it is not randomly distributed in the H. capsulatum genome. S1 nuclease analysis was utilized to map the 5' end of the expressed yps-3 gene in G217B to potential regulatory regions which are largely homologous in both strains. This finding may point to a deficiency in a temperature inducible regulatory protein in the low virulence, temperature-sensitive Downs strain. The nucleotide sequence of the yps-3 gene and the predicted amino acid sequence of its product represents the first report of phase-specific gene and protein sequences in this widely distributed fungal pathogen. Further analysis of the product encoded by the yps-3 gene may provide significant insight into the pathogenic repertoire of H. capsulatum.