Factor B (Bf) is a constituent of the alternative pathway of complement activation encoded within the major histocompatibility complex. Transcription of the murine gene from two initiation sites generates two Bf mRNA species differing in size and tissue distribution. Striking genetic, tissue-specific differences in Bf mRNA levels at extrahepatic sites (kidney and intestine) among mouse strains correlate with a DNA sequence polymorphism in the 5'-flanking region of the gene and differential nuclear protein binding at the Bf upstream transcriptional initiation site (UIS). To ascertain the functional consequences of this polymorphism in the Bf promoter, we analyzed the effects of strain-specific sequences in the Bf 5' region on the expression of a chloramphenicol acetyltransferase (CAT) reporter gene transfected in human and mouse hepatoma cells. The CAT activity and mRNA level produced when transcription was driven by the sequence of strains with high extrahepatic expression were reduced to background levels when the sequence specific to the low expressor strains was used. Eighty percent of this difference was accounted for by a point substitution that affects DNA-protein interaction at the UIS, the sequence of higher affinity conferring higher expression. Hepatocyte nuclear factor 4 (HNF-4), derived from HepG2, mouse liver and kidney or cell-free translation of HNF-4 RNA, is the nuclear protein that preferentially binds to the high expressor UIS. Bf-CAT is not expressed in cells that lack HNF-4 (CV-1). However, co-transfection of HNF-4 into CV-1 cells drives Bf-CAT expression and reproduces the differences derived from the substitution that affect HNF-4 binding in vitro. These data show that interaction of HNF-4 with polymorphic variants of the upstream Bf promoter is the major determinant of strain-specific extrahepatic factor B expression.