Epithelium-specific gene expression is fundamental in both embryogenesis and the maintenance of adult tissues, and impairment of epithelial characteristics contributes to diseases such as cancer. We have here analyzed the 5'-region of the epithelial (E-) cadherin gene in order to understand mechanisms of epithelium-specific transcription and loss of expression during epithelial-mesenchymal transitions. The regulatory region of the mouse epithelial cadherin gene is composed of a promoter (from position -94 to the transcription start site) and a 150-base pair enhancer located in the first intron. The 5'-promoter consists of positive regulatory elements (a CCAAT-box and two AP-2 binding sites in a GC-rich region) and the palindromic element E-Pal that activates and represses transcription in epithelial and mesenchymal cells, respectively. The enhancer of the first intron stimulates the activity of heterologous promoters exclusively in epithelial cells. This epithelium-specific enhancer consists of three elements (E I to E III; E II and E III bind AP-2) that are necessary and sufficient for activity. We thus propose two regulatory mechanisms by which epithelial specificity of epithelial cadherin expression is determined: suppression of promoter activity in mesenchymal cells by E-Pal and enhancement of activity in epithelial cells by both E-Pal and the epithelium-specific enhancer.