The sst2 somatostatin receptor is an inhibitory G protein-coupled receptor, which exhibits anti-tumor properties. Expression of sst2 is lost in most human pancreatic cancers. We have cloned 2090 base pairs corresponding to the genomic DNA region upstream of the mouse sst2 (msst2) translation initiation codon (ATG). Deletion reporter analyses in mouse pituitary AtT-20 and human pancreatic cancer PANC-1, BxPC-3, and Capan-1 cells identify a region from nucleotide -260 to the ATG codon (325 base pairs) showing maximal activity, and a region between nucleotides -2025 and -260 likely to comprise silencer or transcriptional suppressor elements. In PANC-1 and AtT-20 cells, transforming growth factor (TGF)-beta up-regulates msst2 transcription. Transactivation is mediated by Smad4 and Smad3. The cis-acting region responsible for such regulation is comprised between nucleotides -1115 and -972 and includes Sp1 and CAGA-box sequences. Expression of Smad4 in Smad4-deficient Capan-1 and BxPC-3 cells restores TGF-beta-dependent and -independent msst2 transactivation. Expression of Smad4 in BxPC-3 cells reestablishes both endogenous sst2 expression and somatostatin-mediated inhibition of cell growth. These findings demonstrate that msst2 is a new target gene for TGF-beta transcription regulation and underlie the possibility that loss of Smad4 contributes to the lack of sst2 expression in human pancreatic cancer, which in turn may contribute to a stimulation of tumor growth.