Transcription of major histocompatibility complex (MHC) class I genes is negatively regulated in undifferentiated F9 mouse embryonal carcinoma cells via the conserved upstream regulatory region. This region contains constitutive enhancers and an inducible enhancer, the interferon consensus sequence (ICS), that is responsible for interferon-induced transcription. A series of mutations in the ICS, but not in the enhancer elements, resulted in an increase in expression of the MHC class I promoter in F9 cells. However, these ICS mutants did not increase promoter activity in F9 cells differentiated after retinoic acid treatment. Results of mobility-shift DNA-binding assays and methylation interference experiments showed that undifferentiated F9 cells contained a factor(s) that bound to a sequence within the 5' and central part of the ICS. This binding site, termed the MHC negative regulatory element (NRE), coincided with the site of mutations that increased promoter activity in F9 cells and was distinct from the element to which interferon-response factors bind. The factor(s) that binds to the MHC NRE was not detected in differentiated F9 cells treated with retinoic acid or in other cells expressing MHC class I genes. Finally, introduction of concatenated, double-stranded NRE oligomers, but not oligomers of unrelated sequences, into F9 cells abolished negative regulation of the MHC class I promoter activity, providing evidence that the NRE binding factor is responsible for repression of the MHC class I genes in F9 cells.