Transcriptional regulation of the plasminogen activator inhibitor type-2 (PAI-2) gene appears to be an important factor in the response of mononuclear phagocytes to inflammation. We have investigated here the molecular basis for PAI-2 synthesis in monocytic cells by reporter gene deletion analysis. A DNA fragment containing 5.1 kb of 5′ flanking region through to the start of the second exon was fused to a chloramphenicol acetyl transferase (CAT) reporter gene, transfected into macrophage and nonmacrophage cells and tested for PAI-2 promoter-directed CAT activity in the presence and absence of phorbol ester. Deletion analysis showed the existence of three major transcription regulatory regions. (1) A positive regulatory region contained in the proximal promoter mediates basal transcription and 12-phorbol 13-myristate acetate inducibility. (2) A negative regulatory region, or silencer, present between-1977 and-1675, was found to repress PAI-2 promoter activity in an orientation- and position-independent manner, but not in a cell-specific manner. (3) A second positive regulatory element, located upstream between approximately -5100 and -3300, appears to overcome inhibition mediated by the silencer in a cell- specific manner, suggesting a mechanism for the regulation of this gene. We have localized the motif responsible for silencer activity to a 28-bp DNA sequence containing a unique 12-bp palindrome centered at an Xba I restriction enzyme site, CTCTCTAGAGAG, which is designated the PAI-2-upstream silencer element-1 (PAUSE-1). This element binds a specific PAUSE-1 binding factor as determined by mobility shift analysis. We conclude that PAI-2 gene transcription is regulated by both positive and negative control mechanisms that may be important for the regulation of other genes as well.