Arginase (CAR1) gene expression in Saccharomyces cerevisiae is induced by arginine. The 5' regulatory region of CAR1 contains four separable regulatory elements--two inducer-independent upstream activation sequences (UASs) (UASC1 and UASC2), an inducer-dependent UAS (UASI), and an upstream repression sequence (URS1) which negatively regulates CAR1 and many other yeast genes. Here we demonstrate that three homologous DNA sequences originally reported to be present in the inducer-responsive UASI are in fact three exchangeable elements (UASI-A, UASI-B, and UASI-C). Although two of these elements, either the same or different ones, are required for transcriptional activation to occur, all three are required for maximal levels of induction. The elements operate in all orientations relative to one another and to the TATA sequence. All three UASI elements bind protein(s); protein binding does not require arginine or overproduction of any of the putative arginine pathway regulatory proteins. The UASI-protein complex was also observed even when extracts were derived from arg80/argRI or arg81/argRII deletion mutants. Similar sequences situated upstream of ARG5,6 and ARG3 and reported to negatively regulate their expression are able to functionally substitute for the CAR1 UASI elements and mediate reporter gene expression.