The Oct-2 protein is a tissue-specific POU-homeodomain transcription factor. It has been considered to represent a developmental regulator of immunoglobulin gene expression by virtue of its interaction with a functionally essential octamer element found in immunoglobulin gene promoters. This proposal has been most strongly challenged by several in vitro transcription analyses which have shown that the related ubiquitous factor Oct-1 can activate transcription from immunoglobulin gene promoters as efficiently as Oct-2. We have genetically analyzed Oct-2 function by using gene targeting to disrupt both alleles of the locus in the murine B cell line WEHI-231. This cell line expresses productively rearranged immunoglobulin genes as well as the Oct-2 gene at high levels which are comparable to those observed in activated murine splenic B cells. In spite of a drastic reduction in Oct-2 levels (20-fold), no effect was observed on the expression of endogenous immunoglobulin genes or on the activity of a transfected immunoglobulin promoter or a heterologous promoter with a single octamer element. In contrast, expression of a reporter construct containing multiple octamer motifs upstream of a heterologous promoter was severely reduced in the double-disruptant cells. The differential responses of the single- and multiple-octamer motif reporter constructs in the mutant B cells are unlikely to be a consequence of differing concentration requirements for activation by Oct-2. The two constructs are activated equivalently over the same range of Oct-2 concentration in a non-B cell. These results provide genetic support for the existence of an Oct-2-independent, but octamer element-dependent, B cell-specific pathway for immunoglobulin gene transcription. They also genetically reveal a distinct Oct-2-dependent pathway of octamer-mediated gene activation. This study demonstrates the feasibility of targeting a diploid locus in a somatic mammalian cell line. Extension of this approach to genes encoding other transcription factors will allow a genetic dissection of their functions within the context of cell lines representing various differentiation states.