We have cloned and analyzed a developmentally and spatially regulated prestalk cell-specific gene from Dictyostelium discoideum. The gene encodes a protein highly homologous to the lysosomal cysteine proteinases cathepsin H and cathepsin B. Amino acid comparisons between these enzymes showed that the active-site amino acids were conserved, as were amino acids known to be important for catalysis and residues which form the intramolecular cysteine bridges. We have constructed a series of internal deletions, duplications, and linker scanner mutations within the region 300 base pairs 5' to the cap site. Analysis of expression of the mutations in transformants identified a approximately 35-base pair GC-rich region containing a dAdC/dGdT palindromic repeat and a G-rich box which is homologous to the 3' GT half of the palindromic repeat. Deletion or disruption of the G box resulted in a approximately 50-fold drop in the level of expression of the gene fusion in transformants in response to cyclic AMP in single-cell culture but did not affect the temporal pattern of regulation or control by cyclic AMP. The expression of such constructs during normal multicellular differentiation paralleled that of the endogenous gene; however, the level of RNA from the constructs was only approximately 10-fold lower than that of constructs containing the G box. Deletion of the 3' half of the palindromic sequence and the G box region resulted in a dramatic decrease in the level of transcription, although the constructs still showed proper temporal expression. These results suggest that this 35-base-pair region acts as an important part of the regulatory region for cell type and cyclic AMP regulation.