Synthesis of the endogenous opioid precursor, proenkephalin, is regulated by neurotransmitters and membrane depolarization. These events act through second messenger dependent signal transduction pathways via a short inducible DNA enhancer to regulate transcription of the proenkephalin gene. Two DNA elements located within this enhancer are essential for the transcriptional response to cAMP and phorbol ester. Inactivation of either element by mutation or by alteration of their stereospecific alignment eliminates inducible enhancer activity. The promoter distal element, ENKCRE-1, in the absence of a functional adjacent ENKCRE-2 element, has no inherent capacity to activate transcription. However, in the presence of a functional ENKCRE-2 element, this element synergistically augments cAMP and phorbol ester inducible transcription. The promoter proximal element, ENKCRE-2, is essential for both basal and regulated enhancer function. Four different protein factors found in HeLa cell nuclear extracts bind in vitro to the enhancer region. ENKTF-1, a novel enhancer binding protein, binds to the DNA region encompassing ENKCRE-1. The transcription factors AP-1 and AP-4 bind to overlapping sites spanning ENKCRE-2, and a fourth transcription factor, AP-2, binds to a site immediately downstream of ENKCRE-2. The binding of ENKTF-1 to mutant ENKCRE-1 sequences in vitro correlates with the in vivo inducibility of the mutant elements suggesting that ENKTF-1 acts in combination with factors that recognize the ENKCRE-2 domain to regulate cAMP inducible transcription. Together, the two DNA elements, ENKCRE-1 and ENKCRE-2 and the protein factors with which they interact, play a critical role in the transduction and reception of signals transmitted from cell surface receptors to the proenkephalin nuclear transcription complex.