The expression of type I collagen is regulated developmentally and tissue specifically. Two sets of binding sites for nuclear factor I (NF-I) and Sp1 transcription factors arrayed as an imperfect tandem repeat are critical for high activity of the murine alpha 1(I) collagen gene in NIH-3T3 fibroblasts and are conserved in evolution. Gel retardation analysis combined with methylation interference studies show that NF-I and Sp1 bind to overlapping sites in a mutually exclusive manner. Cotransfection studies using Drosophila Schneider L2 cells, which lack both transcription factors, demonstrate that each factor alone trans-activates the gene, while cotransfection of both factors results in the inhibition of the strong Sp1 trans-activation. In contrast, the herpes simplex virus thymidine kinase promoter, which contains functionally independent NF-I and Sp1 binding sites, is maximally transactivated by the cotransfection of both factors. Because the two NF-I/Sp1 binding sites overlap, the ratio of the activities of the two factors rather than their absolute concentrations determine alpha 1(I) gene expression, characterizing these promoter sequences as transcription factor switch elements.