We have mapped the basal promoter activity of the mouse cytochrome c oxidase (COX) subunit Vb gene to the -17 to +20 region which contains two putative ets binding sites flanking an NF-E1 site fused to an Sp1 site. A 17-nucleotide sequence flanking the major transcription start site (-8 to +9), referred to as 17Inr (initiator sequence) was able to drive CAT activity in 3T3 cells to a level comparable to the construct containing sequences -17 to +20. This suggests that the 17Inr sequence contains the initiator activity. The 17Inr contains a pyrimidine-rich sequence, commencing with a CA that corresponds to the major transcription start site. Primer extension of RNA from transfected cells demonstrated that transcription initiation with the 17Inr template occurs at a site identical to the endogenous gene. DNA-protein binding by gel mobility shift and methylation interference analyses indicated that the pyrimidine-rich sequence immediately flanking the transcription start site consists of an NF-E1 factor binding motif with an overlapping upstream Sp1 binding site. A 13-nucleotide sequence, 13Inr (-4 to +9), which retains the NF-E1 binding activity but does not bind Sp1, was able to promote chloramphenicol acetyltransferase gene expression at levels similar to the 17Inr sequence, suggesting that NF-E1 factor binding is critical for initiator function. Finally, using an in vitro transcription system from Drosophila embryos we demonstrate that NF-E1 is necessary for transcription activation of both the 17Inr and the 13Inr initiator templates. Thus NF-E1 binding appears to be important for basal promoter function of the mouse COXVb gene.