Anhidrotic ectodermal dysplasia (EDA) is a disorder characterized by poor development of hair, teeth, and sweat glands, and results from lesions in the X-linked EDA gene. We have cloned a 1.6-kilobase 5'-flanking region of the human EDA gene and used it to analyze features of transcriptional regulation. Primer extension analysis located a single transcription initiation site 264 base pairs (bp) upstream of the translation start site. When the intact cloned fragment or truncated derivatives were placed upstream of a reporter luciferase gene and transfected into a series of cultured cells, expression comparable with that conferred by an SV40 promoter-enhancer was observed. The region lacks a TATA box sequence, and basal transcription from the unique start site is dependent on two binding sites for the Sp1 transcription factor. One site lies 38 bp 5' to the transcription start site, in a 71-bp sequence that is sufficient to support up to 35% of maximal transcription. The functional importance of the Sp1 sites was demonstrated when cotransfection of an Sp1 expression vector transactivated the EDA promoter in the SL2 Drosophila cell line that otherwise lacks endogenous Sp1. Also, both Sp1 binding sites were active in footprinting and gel shift assays in the presence of either crude HeLa cell nuclear extract or purified Sp1 and lost activity when the binding sites were mutated. A second region involved in positive control was localized to a 40-bp sequence between -673 and -633 bp. This region activated an SV40 minimal promoter 4- to 5-fold in an orientation-independent manner and is thus inferred to contain an enhancer region.