Transcription of a Drosophila U1 small nuclear RNA gene was functionally analyzed in cell extracts derived from 0- to 12-h embryos. Two promoter elements essential for efficient initiation of transcription in vitro by RNA polymerase II were identified. The first, termed PSEA, is located between positions -41 and -61 relative to the transcription start site, is crucial for promoter activity, and is the dominant element for specifying the transcription initiation site. PSEA thus appears to be functionally homologous to the proximal sequence element of vertebrate small nuclear RNA genes. The second element, termed PSEB, is located at positions -25 to -32 and is required for an efficient level of transcription initiation because mutation of PSEB, or alteration of the spacing between PSEA and PSEB, severely reduced transcriptional activity relative to that of the wild-type promoter. Although the PSEB sequence does not have any obvious sequence similarity to a TATA box, conversion of PSEB to the canonical TATA sequence dramatically increased the efficiency of the U1 promoter and simultaneously relieved the requirement for the upstream PSEA. Despite these effects, introduction of the TATA sequence into the U1 promoter had no effect on the choice of start site or on the RNA polymerase II specificity of the promoter. Finally, evidence is presented that the TATA box-binding protein is required for transcription from the wild-type U1 promoter as well as from the TATA-containing U1 promoter.