In order to study the molecular processes involved in the final steps of neural induction, we are investigating the transcriptional regulation of the Xenopus laevis neural cell adhesion molecule (NCAM) gene. NCAM is expressed very early during neural development and its expression is dependent on neural induction signals. Using microinjection of reporter gene constructions into fertilized frog eggs, we have shown that cloned copies of the NCAM promoter respond appropriately to neural induction signals. Examination of the Xenopus NCAM promoter reveals a number of potential regulatory elements. We have directed our attention to a small region of the promoter that is highly conserved over large evolutionary distances. This region contains an enhancer, the OZ element, and also a silencer element, the N-box. We have purified DNA DNA proteins that interact specifically with both the OZ enhancer and the N-box silencer sequences. A model suggesting a role for these regulatory factors during neural induction is presented.