The serum amyloid A (SAA) protein has been implicated in the progression and pathogenesis of rheumatoid arthritis through induction of collagenase activity in synovial fibroblast cells that line the joint tissues. We demonstrate that SAA is synergistically induced in synovial cells by interleukin (IL)-1 and IL-6 that are present at significantly high level in the synovial fluid of arthritis patients. These cytokines induced phenotypic changes in synovial cells, promoting protrusion and increased cellular contact. Induction of SAA under this condition is mediated by promoter elements located between -254 and -226, which contains binding sites for transcription factors Sp1 and SAA activating sequence binding factor (SAF). Mutation of these sequences abolishes SAA promoter response to IL-1 and IL-6. The role of Sp1 in SAA induction was demonstrated by increased DNA binding activity, phosphorylation, and increased protein content of Sp1 during cytokine treatment. Sp1 interacts with the SAA promoter in association with SAF as an SAF. Sp1 heteromeric complex. Furthermore, using a phosphatase inhibitor, we demonstrated increased transactivation potential of both Sp1 and SAF as a consequence of a phosphorylation event. These results provide first evidence for cytokine-mediated activation of Sp1 in synovial fibroblast cells and its participation in regulating SAA expression by acting in conjunction with SAF.