Transcription factors Sp1 and AP-2 mediate induction of acid sphingomyelinase during monocytic differentiation. Cells from the human monocytic leukemia cell line THP-1 differentiate towards a macrophage-like phenotype when stimulated with phorbol 12-myristate -13- acetate (PMA), 1,25-dihydroxy-vitamin D3, and various other agents. We demonstrate here that the expression of the lysosomal enzyme acid sphingomyelinase (ASM; E.C.3.1.4.12) is induced during this process and is strongly elevated in differentiated THP-1 cells, as well as in differentiated human mononuclear phagocytes. Using Northern blotting, RNase protection assay, and nuclear run-on analyses, we show that the up-regulation of ASM expression is regulated mainly at the level of transcription and that new protein synthesis is required for enhanced ASM activity. This cell-type specific induction by PMA treatment was further investigated with respect to transcriptional control. A series of 5' deletion derivatives of the upstream regulatory region were used in transient transfection assays to identify promoter elements required for basal and inducible gene expression. A PMA responsive element was localized to a region between -319 and -219 bp upstream of the initiation codon and co-transfections with transcription factor expression plasmids for AP-2 and Sp1 resulted in augmented ASM promoter activity, which was abolished when the binding sites for these two factors were deleted. Using electrophoretic mobility shift assays and supershift assays we demonstrate that this region is specifically bound by Sp1 and AP-2. These factors are present in nuclear extracts prepared from both induced and uninduced THP-1 cells. However, the intensity of the complex formed appeared to increase when nuclear extracts from PMA-treated cells were used. From these studies, we conclude that a concerted action of the transcription factors AP-2 and Sp1 is essential for the up -regulation of ASM expression during the process of macrophage differentiation.