Ten years ago a search was initiated for DNA variation in the alpha-1-antitrypsin gene (alpha 1-AT) to determine whether there were mutations more commonly associated with patients who had chronic obstructive airways disease (COAD) than with healthy individuals. Using the conventional approach of Southern blotting and searching for restriction fragment length polymorphisms, we identified a potentially useful polymorphism that resulted in the loss of a recognition site for the restriction enzyme, Taq I. The polymorphism occurred in about 17% of patients with COAD and about 5% of the general population (p = 0.0016). The normal sequence in the 3' flanking region of the alpha 1-antitrypsin gene had to be characterized, as it was not known. On the basis of homology, a number of closely clustered sequence motifs demonstrating the characteristics of an enhancer were identified that would potentially increase the transcription and expression of alpha 1-antitrypsin. The normal Taq I sequence occurred in a motif that demonstrated homology to a DNA sequence for octamer transcription factors. The mutation was characterized by in vitro amplification of the region and direct sequencing as a G to A transition (Taq I site TCGA < TCAA). Specific binding of nuclear proteins by gel-shift analysis and DNase I footprinting and increased in vivo transcriptional activity were demonstrated by transfection of mammalian cells containing DNA fragments corresponding to the region of interest. In contrast, the mutant sequence demonstrated loss of binding to nuclear proteins and reduced transcriptional activity. The latter finding was not confined to tissues known to express alpha 1-antitrypsin.(ABSTRACT TRUNCATED AT 250 WORDS)