We have previously described a 160-bp enhancer (BCE-1) in the bovine beta-casein gene that is activated in the presence of prolactin and extracellular matrix (ECM). Here we report the characterization of the enhancer by deletion and site-directed mutagenesis, electrophoretic mobility shift analysis, and in vivo footprinting. Two essential regions were identified by analysis of mutant constructions: one binds C/EBP-beta and the other binds MGF/STAT5 and an as-yet-unidentified binding protein. However, no qualitative or quantitative differences in the binding of these proteins were observed in electrophoretic mobility shift analysis using nuclear extracts derived from cells cultured in the presence or absence of ECM with or without prolactin, indicating that prolactin- and ECM-induced transcription was not dependent on the availability of these factors in the functional cell lines employed. An in vivo footprinting analysis of the factors bound to nuclear chromatin in the presence or absence of ECM and/or prolactin found no differences in the binding of C/EBP-beta but did not provide definitive results for the other factors. Neither ECM nor prolactin activated BCE-1 in transient transfections, suggesting that the chromosomal structure of the integrated template may be required for ECM-induced transcription. Further evidence is that treatment of cells with inhibitors of histone deacetylase was sufficient to induce transcription of integrated BCE-1 in the absence of ECM. Together, these results suggest that the ECM induces a complex interaction between the enhancer-bound transcription factors, the basal transcriptional machinery, and a chromosomally integrated template responsive to the acetylation state of the histones.