We have identified and characterized two mutually exclusive nuclear proteins that interact with a single crucial element of the albumin promoter. One, albumin proximal factor (APF), is found only in liver or differentiated hepatoma cells and is probably identical to the liver-specific factor named HNF1, alpha 1TFB, or HP1-binding protein. The other, variant albumin proximal factor (vAPF), is present in dedifferentiated hepatoma cells as well as in somatic cell hybrids that show extinction of the expression of liver-specific proteins, including albumin. Reversion to the hepatic phenotype of either a dedifferentiated variant or an extinguished somatic hybrid clone is accompanied by loss of vAPF and reappearance of APF. These two proteins differ in their thermostability and in their molecular weight, while displaying identical sequence specificities. Both proteins interact with a homologous motif present in promoter regions of several other liver-specific genes. In vitro transcription assays, using a rat liver nuclear extract, indicate that the binding of APF to its target sequence is required for albumin transcription. These results suggest that a modification in the primary structure of a transcription factor is correlated with the differentiated state of the hepatic cell.