The embryonic avian neuroretina (NR) is part of the central nervous system and is composed of various cell types: photoreceptors and neuronal and Müller (glial) cells. These cells are derived from proliferating neuroectodermal precursors which differentiate after terminal mitosis and become organized in cell strata. Proliferation of differentiating NR cells can be induced by infection with Rous sarcoma virus (RSV) and requires the expression of a functional v-src gene. To understand the mechanisms involved in the regulation of neural cell growth and differentiation, we studied the transcriptional regulation of QR1, a gene specifically expressed in postmitotic NR cells. Transcription of this gene is detected primarily in Müller cells and is strongly downregulated by the v-src gene product. Moreover, QR1 expression takes place only during the late phase of retinal development and is shut off abruptly at hatching. We have isolated a promoter region(s) of the QR1 gene that confers v-src responsiveness. By transfection of QR1-CAT constructs into quail NR cells infected with the temperature-sensitive mutant of RSV, PA101, we have identified a v-src-responsive region located between -1208 and -1161 upstream of the transcription initiation site. This sequence is able to form two DNA-protein complexes, C1 and C2. Formation of complex C2 is specifically induced in cells expressing an active v-src product, while formation of C1 is detected mainly in nonproliferating quail NR cells upon pp60v-src inactivation. C1 is also a target for regulation during development. We have identified the DNA binding site for the C1 complex, a repeated GCTGAC sequence, and shown that mutations in this element abolish binding of this factor as well as transcription of the gene at the nonpermissive temperature. Neither formation of C1 nor that of C2 seems to involve factors known to be targeted in the pp60v-src cascade. Our data suggest that C1 could be a novel target for both developmental control and oncogene-induced cell growth regulation.