A novel mammalian regulatory system was created by using the Escherichia coli lac repressor. The lac repressor was converted into a mammalian transcriptional activator by modifying the lac repressor coding region to include a nuclear localization signal from the simian virus 40 (SV40) large tumor antigen and the transcription activation domain from the herpes simplex virus type 1 virion protein 16. The lac activator protein (LAP) fusions were potent activators of several promoters containing lac operator sequences positioned either upstream or downstream of the transcription unit. A single lac operator allowed for transactivation, whereas multiple operators acted synergistically when separated by a small distance. Promoters containing 14 or 21 operator sequences were induced at least 1,000-fold in response to LAP, reaching levels of activity 20 to 30 times greater than that of the SV40 early promoter in HeLa cells. Activation was strongly inhibited by isopropyl-beta-D-thiogalactoside (IPTG), indicating that LAP retained the functions needed for allosteric regulation. LAP was bifunctional, also acting as a repressor of expression of an SV40 promoter containing an operator immediately downstream of the TATA box. Finally, genetic selection schemes were developed such that LAP-expressing cell lines can be generated at high frequency from either established or primary cells in culture.