The Larval serum protein-2 gene (Lsp-2) of Drosophila melanogaster is uniquely expressed in the fat body tissue from the beginning of the third instar to the end of adult life. Accumulation of the larval Lsp-2 transcript is enhanced by 20-hydroxyecdysone. To study the molecular basis for ecdysone regulated Lsp-2 activity, deletion mutants of the Lsp-2 5'-flanking region were constructed by fusion to either the Escherichia coli chloramphenicol acetyltransferase (CAT) gene or to an hsp70-lacZ hybrid gene encoding beta-galactosidase. Constructs transfected into Drosophila S2/M3 cells were shown to confer transient ecdysone inducibility on the reporter genes. A single functional ecdysone response element (EcRE) was localized at position -75 relative to the Lsp-2 transcription initiation site. In gel mobility shift assays using fat body nuclear extracts or nuclear receptors synthesized in vitro, a 27-bp sequence harboring the EcRE bound both the Drosophila ecdysone receptor and the Drosophila retinoid-X homologue, Ultraspiracle, in a cooperative manner. Competition experiments indicate that the affinity of the Lsp-2 EcRE for the ecdysone receptor complex is comparable to that of the canonical EcRE of the hsp27 gene and is at least 4-fold greater than that of Fbp1, another fat body-specific Drosophila gene. Our results suggest that structural features of this EcRE determine its ability to induce ecdysone responsiveness at a lower ligand concentration and may form the basis for differential hormone responsiveness within the fat body.