Expression of the DAL2, DAL4, DAL7, DUR1,2, and DUR3 genes in Saccharomyces cerevisiae is induced by the presence of allophanate, the last intermediate of the allantoin degradative pathway. Analysis of the DAL7 5'-flanking region identified an element, designated the DAL upstream induction sequence (DAL UIS), required for response to inducer. The operation of this cis-acting element requires functional DAL81 and DAL82 gene products. We determined the DAL UIS structure by using saturation mutagenesis. A specific dodecanucleotide sequence is the minimum required for response of reporter gene transcription to inducer. There are two copies of the sequence in the 5'-flanking region of the DAL7 gene. There are one or more copies of the sequence upstream of each allantoin pathway gene that responds to inducer. The sequence is also found 5' of the allophanate-inducible CAR2 gene as well. No such sequences were detected upstream of allantoin pathway genes that do not respond to the presence of inducer. We also demonstrated that the presence of a UIS element adjacent to the nitrogen-regulated upstream activation sequence significantly enhances its operation.