Prosaposin is a multifunctional protein that, when secreted, functions as a neurotrophic agent and, when retained in the lysosomes, is processed to essential glycosphingolipid hydrolase activator proteins. The prosaposin locus is temporarily and spatially regulated at the transcriptional and post-translational levels. The prosaposin gene has been partially characterized, but the 5' region has not. RACE, S1 nuclease protection, and sequence analysis were used to characterize the first intron and first exon as well as the 5'-flanking regions from murine P1 clones. The first intron is approximately 15 kb in length and the complete gene is approximately 25 kb. The transcriptional initiation sites are located 87 and 94 bp 5' to the ATG in exon 1. Using luciferase as a reporter gene and transfection into NS20Y, NIH-3T3, or SF-7 Sertoli cell cultures, deletion constructs from the 5' putative promoter region were shown to contain positive and negative regulatory elements within 2,400 bp 5' to the transcription start site. A negative regulatory element is located between 742 and 310 bp 5' to the transcription start site. These studies provide insight into the regulation of this unique "lysosomal" locus.