Betaine is a major compatible osmolyte accumulated in the mammalian kidney medulla and in Madin-Darby canine kidney cells in response to hypertonicity. The accumulation is the result of an increase in maximal velocity of the Na(+)- and Cl-coupled betaine transporter designated BGT1. We have previously cloned the canine BGT1 gene and identified a tonicity-responsive enhancer element (TonE) in its 5'-flanking region. Here we report studies of transgenic mice that have in their genome 2.4 kb of the 5'-flanking region of the canine BGT1 gene in front of a chloramphenicol acetyl-transferase (CAT) reporter. Expression of CAT mRNA was detected only in the renal medulla and was increased by experimental manipulations that increase the tonicity of the renal medulla and decreased by manipulations that decrease medullary tonicity. We conclude that the 2.4-kb 5'-flanking region of the BGT1 gene mediates an increase in transcription in response to hyperosmolarity in the renal medulla.