Positive signaling by nitrate in its assimilation pathway has been studied in Chlamydomonas reinhardtii. Among >34,000 lines generated by plasmid insertion, 10 mutants were unable to activate nitrate reductase (NIA1) gene expression and had a Nit(-) (no growth in nitrate) phenotype. Each of these 10 lines was mutated in the nitrate assimilation-specific regulatory gene NIT2. The complete NIT2 cDNA sequence was obtained, and its deduced amino acid sequence revealed GAF, Gln-rich, Leu zipper, and RWP-RK domains typical of transcription factors and transcriptional coactivators associated with signaling pathways. The predicted Nit2 protein sequence is structurally related to the Nin (for nodule inception) proteins from plants but not to NirA/Nit4/Yna proteins from fungi and yeast. NIT2 expression is negatively regulated by ammonium and is optimal in N-free medium with no need for the presence of nitrate. However, intracellular nitrate is required to allow Nit2 to activate the NIA1 promoter activity. Nit2 protein was expressed in Escherichia coli and shown to bind to specific sequences at the NIA1 gene promoter. Our data indicate that NIT2 is a central regulatory gene required for nitrate signaling on the Chlamydomonas NIA1 gene promoter and that intracellular nitrate is needed for NIT2 function and to modulate NIA1 transcript levels.