Vasopressin (VP) gene expression in the rat suprachiasmatic nucleus (SCN) is subject to a cyclical mode of regulation which is indicative of a close association with the circadian clock intrinsic to this area of the hypothalamus. Previous studies show that both the amount and size (due to differential polyadenylation) of VP mRNA are reduced during the dark phase of the daily cycle. We have now identified the cellular site wherein these changes are mediated. By transcriptional run-on analysis of nuclei isolated at different time points from the SCN we have shown that an attenuation of transcriptional activity can account for the dark-phase reduction in VP mRNA levels; by comparison with other genes expressed in this tissue, a significant, VP gene-specific reduction was observed which resulted in dark-phase transcriptional activity at 30% of light-phase activity (P less than 0.005). A similar diurnal variation was not found in the supraoptic nucleus. In addition, by Northern analysis of sub-cellular RNA pools, we have demonstrated that the smaller, dark-phase-specific VP RNA species is located, in abundance, within the nuclear fraction. These results provide clear evidence that the cyclical changes in SCN VP mRNA expression are primarily regulated within the nucleus, indicating that any potential regulation in the cytoplasm is of secondary importance. Further analysis of the molecular components which mediate the cyclical changes in transcriptional activity of the VP gene may identify fundamental aspects of neuronal timing mechanisms.