The regulation of transcription of the gene for the cytosolic form of phosphoenolpyruvate carboxykinase (GTP) (PEPCK-C) (4.1.1.32) during diabetes is a complex process that involves a number of regulatory elements in the PEPCK-C gene promoter. The accessory factor 2 (AF2)-binding region that is contained within the glucocorticoid regulatory unit of the PEPCK-C gene promoter (-451 to -353) has been implicated in the action of both insulin and glucocorticoids on PEPCK-C gene transcription. To determine the role of AF2 in these processes, we have generated a mouse model bearing a transgene that contains the PEPCK-C gene promoter with a mutation in the AF2-binding region. This promoter is linked to the structural gene for human growth hormone that is biologically inactive (AF2-2000/hGx). In the absence of the AF2 regulatory element, the transcription of the transgene in the liver is not induced by diabetes but is inhibited by the administration of insulin. There is also a marked reduction in the response of the AF2-2000/hGx gene in the kidney to the administration of glucocorticoids. The AF2-2000/hGx gene in the liver responds normally to a high carbohydrate diet with a marked decrease in gene transcription. This suggests that insulin is not exerting its usual negative effect on the PEPCK-C gene promoter through the AF2 site. In contrast, the response of this transgene to a high fat/carbohydrate-free diet is severely blunted. Our results support a role for the AF2 site in the PEPCK-C gene promoter in the effect of glucocorticoids, but not insulin, on PEPCK-C gene transcription in the liver.