In vitro transcription of the rat rRNA gene led to the identification of a region within a 3.4-kilobase fragment of the nontranscribed spacer (NTS) which significantly increased the transcription of rat ribosomal DNA. Promoter constructs containing this region were transcribed up to 17-fold more efficiently in vitro than templates with only 167 or 286 base pairs of NTS. This effect was also observed when the 3.4-kb fragment of the NTS was subcloned in the opposite orientation and 4 kb upstream of the promoter. The region responsible for the enhanced level of transcription was found between -286 and -1018. The results of order-of-addition experiments suggested that the enhanced level of transcription was the result of the formation of a stable complex between a trans-acting factor and the nontranscribed spacer. DNA-protein binding assays demonstrated that the same region of the NTS determined to have enhancer activity also specifically bound a proteinase K-sensitive factor present in nuclear extracts. The sequence of this region was not found to have any significant homology with the promoter of the rat rRNA gene. This is the first report to assign a transcriptional role to the NTS of a mammalian rRNA gene.