We reported previously that transforming growth factor beta (TGF-beta) selectively induced high levels of connective tissue growth factor (CTGF) mRNA and protein in human skin fibroblasts. In this study, we investigated the molecular mechanism for TGF-beta regulation of CTGF gene expression. Northern blot and run-on transcription assays indicate that TGF-beta directly activates transcription of the CTGF gene. Fragments of the 5'flanking region of the human CTGF gene were linked to luciferase reporter constructs. TGF-beta induced a 25-30 fold increase in luciferase activity in NIH/3T3 fibroblasts that had been transfected with this construct compared with nontreated cells after 24 h incubation. Other growth factors, such as platelet derived growth factor or fibroblast growth factor, caused only a 2-3-fold induction. This response to TGF-beta occurred only in human skin fibroblasts, fetal bovine aortic smooth muscle cells, and NIH/3T3 fibroblasts but not in the epithelial cell lines tested. Analysis of deletion mutants indicated that an important TGF-beta regulatory element is located between positions -162 and -128 of the CTGF promoter sequence. A fragment of the promoter containing this region conferred TGF-beta induction to a SV40 enhanceriess promoter. Methylation interference and competition gel shift assays mapped a unique 13-nucleotide sequence delineating a novel TGF-beta cis-regulatory element. Point mutations in this region result in a complete loss of the TGF-beta induction, identifying this sequence as a new TGF-beta response element.