Using a Drosophila transgenic system we investigated the ability of GAGA factor, a putative anti-repressor, to modulate transcription-related events in the absence or presence of a bona fide activator, the Adf-1 transcription factor. In contrast to previous in vitro and in vivo data linking the binding of GAGA factor to the acquisition of DNase hypersensitivity at heat shock promoters, we observed that inserting multiple GAGA binding motifs adjacent to a minimal alcohol dehydrogenase (Adh) promoter led to strongly elevated embryonic transcription without creation of a promoter-associated DNase-hypersensitive (DH) site. Establishment of DNase hypersensitivity required the presence of both GAGA and Adf-1 binding sites and was accompanied by a further, synergistic increase in transcription. Because Adf-1 is capable neither of establishing a DH site nor of promoting efficient transcription by itself in embryos, it is likely that DH site formation depends on a GAGA factor-mediated binding of Adf-1 to chromatin, perhaps facilitated by a locally remodeled downstream promoter region. More generally we suggest that GAGA factor-binding sequences may operate in a promoter-specific context, with transcriptional activation, polymerase pausing, and/or DH site formation critically dependent on the nature of the sequences (and their binding partners) linked in cis.Control of eukaryotic transcription is a complex, tightly regulated process requiring the action of many distinct proteins, including chromatin-interacting/modifying proteins, transcriptional activators, and general transcription factors (GTFs) 1 (for review see Refs. 1-3). In addition to recent progress in determining the role of chromatin-interacting proteins, unraveling the mechanisms by which sequence-specific, DNA-binding activators promote transcription has traditionally occupied a good deal of effort in the field. The consensus emerging from studies on many activators is that a significant activity of these proteins is to recruit components of the general transcription machinery and/or chromatin-interacting factors to promoters through direct protein-protein interactions (4).The Drosophila GAGA factor is unusual in that its activity in transcription appears to be neither that of a purely sequencespecific transactivator nor that of an ATP-dependent chromatin-interacting factor. GAGA protein was first identified as a transcription factor that bound a repetitive GA element upstream of the engrailed (5) and Ultrabithorax (6) promoters. So-called GAGA elements have subsequently been identified in numerous promoters, including those controlling housekeeping, developmentally regulated, and inducible genes (7). GA repeats appear to be important in the acquisition of constitutive DNase I-hypersensitive (DH) sites found at the transcriptionally inactive but inducible hsp26 (8) and hsp70 (9) promoters in vivo. Moreover, in concert with the ATP-dependent nucleosome remodeling factor (NURF), GAGA factor aids in the local remodeling of GAGA element-containing chromatin templ...