To define the molecular mechanisms involved in the action of gamma interferon (IFN-gamma), we have analyzed the transcriptional regulation of the mig (monokine induced by gamma interferon) gene, a member of the platelet factor 4-interleukin-8 cytokine family that is expressed in murine macrophages specifically in response to IFN-gamma. Analysis of mig/CAT chimeric constructs transiently transfected into the RAW 264.7 mouse monocytic cell line revealed a unique IFN-gamma-responsive element (gamma RE-1). The sequence of this cis regulatory element defined by deletion analysis contains an imperfect inverted repeat extending 27 bp. Examination of mig/CAT constructs with mutations in gamma RE-1 revealed that the palindromic positions in the element were essential for activity. Consistent with its function as an enhancer, a single copy of gamma RE-1 conferred IFN-gamma inducibility to a heterologous (herpes simplex virus thymidine kinase) promoter. Exonuclease III protection assays demonstrated symmetrical protection of a mig promoter fragment centered about the gamma RE-1 palindromic sequence. Using the gel electrophoretic mobility shift assay, we identified a factor (gamma RF-1) present in nuclear extracts prepared from IFN-gamma-stimulated RAW 264.7 cells which binds to gamma RE-1. The activation of gamma RF-1 occurred rapidly (within 1 min) in response to IFN-gamma and was independent of protein synthesis. Similar to the expression of mig mRNA, the formation of gamma RF-1 was selectively induced by IFN-gamma and not IFN-alpha. The regulation of gene expression through gamma RF-1 and gamma RE-1 may explain the preferential activation of a subset of interferon-inducible genes by IFN-gamma.