The expression of the vitamin K-dependent gamma-glutamyl carboxylase gene in liver is developmentally regulated. Since the gene product catalyzes an essential post-translational modification of the vitamin K-dependent blood coagulation proteins, the regulation of carboxylase expression is critical for hemostasis. We analyzed the activity of the rat carboxylase gene 5'-regulatory DNA sequences in rat hepatoma cell lines at different states of differentiation. These studies demonstrated that the 2.6-kb 5'-flanking sequence has differentiation-dependent transcriptional activity. Transient gene expression assays, examining the effects of nested deletions and site-directed mutagenesis of putative regulatory sequences, together with electrophoretic mobility shift assays (EMSAs) were used to identify sequences critical for the developmentally regulated transcription of the rat carboxylase gene. We identified a DNA sequence (-76 to -65; GTTCCGGCCTTC) not known to bind to transcription factors, yet which functions as an upstream promoter element. In vivo genomic DNA footprinting confirms the presence of nuclear protein-DNA interactions at this site in the endogenous carboxylase gene in differentiated hepatoma cells. Therefore, this DNA sequence has specific nuclear protein-binding activity and functional properties consistent with a regulatory element that plays a critical role in the developmental expression of the carboxylase gene, and hence the regulation of vitamin K-dependent blood coagulation protein synthesis.