Glucagon gene expression in the endocrine pancreas is controlled by three islet-specific elements (G3, G2, and G4) and the alpha-cell-specific element G1. Two proteins interacting with G1 have previously been identified as Pax6 and Cdx2/3. We identify here the third yet uncharacterized complex on G1 as hepatocyte nuclear factor 3 (HNF-3)beta, a member of the HNF-3/forkhead transcription family, which plays an important role in the development of endoderm-related organs. HNF-3 has been previously demonstrated to interact with the G2 element and to be crucial for glucagon gene expression; we thus define a second binding site for this transcription on the glucagon gene promoter. We demonstrate that both HNF-3alpha and -beta produced in heterologous cells can interact with similar affinities to either the G1 or G2 element. Pax6, which binds to an overlapping site on G1, exhibited a greater affinity as compared with HNF-3alpha or -beta. We show that both HNF-3beta and -alpha can transactivate glucagon gene transcription through the G2 and G1 elements. However, HNF-3 via its transactivating domains specifically impaired Pax6-mediated transactivation of the glucagon promoter but had no effect on transactivation by Cdx2/3. We suggest that HNF-3 may play a dual role on glucagon gene transcription by 1) inhibiting the transactivation potential of Pax6 on the G1 and G3 elements and 2) direct activation through G1 and G2.