Pancreatic expression of the glucagon gene depends on multiple transcription factors interacting with at least three DNA control elements: G1, the upstream promoter element, and G2 and G3, two enhancer-like sequences. We report here that the major enhancer of the rat glucagon gene, G2, interacts with three protein complexes, A1, A2, and A3. A2 is detected only in islet cells, and impairment of its binding to mutant G2 causes a marked decrease in transcriptional activity. We identify A1 as hepatocyte nuclear factor 3 beta (HNF-3 beta), a member of the HNF-3 DNA-binding protein family found in abundance in the liver which has been proposed to play a role in the formation of gut-related organs. HNF-3 beta binds G2 on a site which overlaps A2 and acts as a repressor of glucagon gene expression, as demonstrated by mutational analyses of G2 and by cotransfection of HNF-3 beta cDNA along with reporter genes containing G2 into glucagon-producing cells. Our data implicate HNF-3 beta in the control of glucagon gene expression and strengthen the idea of endodermal origin of the islet cells.