The alpha-fetoprotein (AFP) gene is normally expressed in fetal liver and is transcriptionally silent in adult liver but is reactivated in hepatocellular carcinoma. It has been shown that the positive and negative transcriptionally regulatory elements of the human AFP gene, which play an important role in its developmental regulation, exist over the quite extended region (4 kb). We constructed a hybrid gene consisting of herpes simplex virus thymidine kinase (HSV-tk) gene under the control of the 0.3-kb human AFP gene promoter and inserted it into a retroviral vector. When AFP-producing hepatoma cells were infected with this recombinant retrovirus (LNAF0.3TK virus), the cells expressed HSV-tk gene and exhibited increased sensitivity to ganciclovir parallel with the ability of AFP production. On the other hand, the retroviral infection had little effect on ganciclovir-mediated cytotoxicity in AFP-nonproducing hepatoma or non-hepatoma cells. Moreover, the addition of dexamethasone increased the cytotoxicity of aciclovir to the virus-infected, AFP-producing cells through a glucocorticoid-responsive element in the AFP promoter, although aciclovir, by itself, had little cytotoxicity. These results demonstrate that the AFP promoter sequence alone can provide enough tumor-specific activity for therapeutic gene expression and induce selective growth inhibition by ganciclovir in the virus-infected, AFP-producing human hepatoma cells. In addition, it is possible that expression of the therapeutic gene is modulated by administration of dexamethasone or other agents that alter AFP promoter activity after gene transduction.